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Determining CMMS Outcomes With Simple Cost Benefit Analysis

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A positive return on investment (or ROI) is an important metric to prove before making a business investment decision. In most situations, ROI is calculated in the context of marketing and sales investments to expand an organization’s awareness or client base. Along with being one of the most important metrics from which to base decisions on, it can also be one of the most difficult metrics to calculate, especially when it comes to CMMS systems.

Let’s look at the ROI formula:  CMMS ROI = (Value – Cost) / Cost

Seems simple right? Guess again. Determining the “value” variable of a CMMS is a complex task and becomes increasingly more difficult the larger your operations are. Because value is found within the areas of cost saving, facility managers look to maintenance data, such as:

  • Asset and Equipment Life,
  • Reduced Downtime,
  • Parts and Inventory,
  • Increased Productivity, and

The irony here is that the value metrics needed to move forward with CMMS buying decisions are the same metrics generated by a software system of this nature. As facility managers find themselves in a chicken vs egg scenario, projects are halted before they even begin.

So how do we make the case for investing in software when we can’t find its ROI? The answer lies in the calculation of another business metric- cost benefit analysis.

A cost benefit analysis assesses the trade-off between a project’s proposed benefits and its costs. If the benefits seem to outweigh the costs, then a business can reasonably move forward with such a project. If the organization finds it would have a negative impact on the department, then it may want to reassess the reasons they pursued CMMS implementation in the first place. Either way, determining the benefits of CMMS is much easier than quantifying a dollar amount for its value as you would when calculating ROI.

As the name suggests, a CMMS cost benefit analysis is comprised of two variables, cost and benefit. Both variables however are determined by several factors, each of which we will examine in closer detail.

Benefits

We suggest making a list of all the benefits a CMMS offers your organization, both tangible- you can apply a monetary value to it, and intangible- intrinsic benefits that may be harder to quantify.

Tangible Benefits

  • Extend the life of assets and equipment

A wealth of research suggests that implementing a formal preventive maintenance system extends the life of assets. One report confirms that without a PM program the expected useful life (EUL) of a manufacturer’s assets would decrease by 10-90% depending on the specific asset. A common statistic used by CMMS industry research states the average increase in an asset’s life expectancy is 20% when preventive maintenance is regularly applied. A similar approach to quantifying your organization’s PM implementation can be taken by tracking a small sampling of critical equipment/ assets and measuring its estimated breakdown period with and without PM in place. You can also speak with the asset’s manufacturer to better understand its EUL and how preventive maintenance can help.

  • Reduced downtime

It is easy to make the case for preventive maintenance by looking at the effect it has on reducing equipment downtime. This is an important and quantifiable metric as scheduling maintenance procedures instead of waiting for assets to breakdown without warning significantly increases the asset’s uptime. If your equipment suddenly requires un-scheduled repair, your organization’s overall productivity slows which has huge implications on your bottom line.

  • Eliminate manual processes

One of the greatest benefits that a CMMS system provides its users with is extensive automation, and a CMMS’ preventive maintenance module is no exception. Work orders automatically generate on a given frequency and are pre-assigned to a specific technician for completion. Further, e-mail notifications are sent in advance, both when work is due and to communicate any past due projects. For managers, reports are automatically emailed on a given frequency, eliminating the need to manually gather data and create weekly, monthly, or quarterly reports. Maintenance software systems also include work order templates for equipment models. This allows users to easily create new PMs for units with existing model types, saving the user time and ensuring all PMs are standardized. Some systems can also be set up to order parts when minimum quantity thresholds have been met. Having this level of automation frees up maintenance worker’s time to focus on maintaining facilities and equipment.

  • Reduce maintenance costs

If you don’t have a formal preventive maintenance system in place, your technicians are waiting for equipment to break down and then reacting. This is very costly in many ways. Firstly, corrective maintenance is more costly than planned preventive maintenance. In one scenario an air compressor’s repair costs were compared to its preventive maintenance.  It found that with a PM program the compressor would have to be fixed once every 4 years translating to a cost of $236/ yr. With preventive maintenance, the same compressor would need to be fixed in three years at a cost of $315/ yr. Although a $79 difference may not seem significant at first, consider the implications of servicing dozens of air compressors, handlers, and HVAC systems across multiple facilities year after year. $79 quickly adds up to tens of thousands of dollars in maintenance repair across your entire operations.

  • Increase worker productivity

In addition to maintenance repair cost savings, a PM system will make your maintenance team more productive. By planning maintenance on a set schedule, your team is better utilized within their work hours. Projects don’t spill into overtime as all jobs are carefully planned and coordinated to fit within the timeframe of a normal 8 hour workday. The result is lower labor costs and a better work/life balance for staff. These small adjustments are easily made via nimble calendar and scheduling tools within the system. CMMS software makes it easy to pull up staff schedules and make adjustments.

All productivity info is easily tracked and monitored through a CMMS system. Due dates and estimated completion times can be assigned to work orders and reports are then generated to show a performance breakdown of the maintenance team.

  • Create a paperless environment

Paper-based maintenance activities may satisfy the immediate requirements but it makes record keeping a nightmare. With CMMS software, the maintenance department moves away from work orders and task lists on paper and towards automated processes. Keeping data in a centralized location allows it to continuously be tracked and measured, whereas manual methods don’t allow for efficient data collection let alone in-depth analysis for reporting. Managers then find themselves spending precious work hours combing through paper to find reporting data or hand written work orders to view an asset’s maintenance history. As CMMS systems become more user-friendly and affordable- initial barriers for many organizations in the past- businesses are more and more willing to move away from archaic paper-based systems.

  • Make data-driven decisions

CMMS software allows maintenance managers and supervisors to access data quickly and make informed decisions based on in-depth reporting. If you have hundreds of work orders and purchases being processed monthly, managers need to make sense of equipment records to gage its performance. Maintenance management systems are equipped with metrics and KPIs that managers use to monitor their departments and make informed decisions to improve processes. Without metrics, managers are working off intuition and their gut feeling….which shall we say can be less than accurate.

Intangible Benefits

  • Increased visibility and transparency

Often overlooked as a CMMS benefit is the transparency that it brings to departments. There is nothing worse than a supervisor grilling the team on how performance needs to be improved without data to support it. Maintenance management systems allow managers and staff to agree on expectations and monitor performance to adjust their methods. Measuring and tracking of data is standard across the entire maintenance operation to instill an environment of fairness and provide the manager with solid data to back up their evaluations.

  • Improved customer satisfaction

Although it may be difficult to calculate the extent to which CMMS software affects customer satisfaction, one can ascertain that CMMS plays its part. One of those indications is shown through a system’s PM program. As indicated above, preventive maintenance helps to decrease downtime on assets to increase overall productivity. Customers are satisfied when their orders are shipped on time and correctly, aspects that wouldn’t always be possible without the help of automated processes.

  • Improved employee moral

Put simply, an empowered employee is happier and more productive. CMMS systems provide simple tools for maintenance staff to do their jobs better and faster. When management purchases systems with their staff in mind it sends a huge message that they are valued and have ownership over their own tasks. As ownership and autonomy increase, employees become more motivated and perform more efficiently which in turn has significant productivity benefits and increases the bottom line. Read more about how employee motivation affects productivity here. Additionally, investing in a CMMS signals to employees that management is taking steps to streamline processes that may have been outdated or unintuitive. Managers who seek to foster a culture of continuous improvement are seen as positive leaders and role models to their employees.

Costs

Now that we have a list of CMMS benefits, we need to look at the costs. When it comes to costs associated with CMMS, you need to consider both direct and indirect costs. For the purpose of this analysis we will only consider web-based CMMS software.

Direct Costs

  • Software license fees

Software license fees are either paid annually for a small discount or month-to-month to mitigate perceived buyer risk. Despite the pay period, these fees are ongoing and allow the buyer to act as a software leaser. Software license fees vary from vendor to vendor depending on their features and price structure. Although vendors commonly charge a per user license fee, others offer a more creative pricing structure such as charging per facility or building. For more information on how to research the best CMMS for your business, read our post here. Once you have a few vendors in mind, plug in their applicable license fee to your cost/ benefit analysis.

  • Set up fees

Usually, but not always, there are some set up costs associated with implementing a CMMS system. These costs vary depending on the vendor and the level of services required. At Hippo CMMS, 10% of our clients have our engineers come on-site, audit all equipment, and handle data integration from start to finish; 75% deliver data sheets for Hippo integration specialists to validate and import; and 15% take the DIY approach. Site audits obviously involve higher set up costs than providing data sheets to be imported. For more information on how to choose the right setup type for your organization, read our post here and here.

  • Training and technical support fees

It’s a good idea to pad your CMMS budget with enough room to accommodate potential training and technical support fees. One of the most frequently cited reasons for CMMS implementation failures is lack of training and support from the vendor. Personalized training sessions are the best way to properly understand various features that a CMMS has to offer and can be catered to each of your users for relevancy. The good news is that many vendors now offer free training and tech support for a period or bundle these services into the license fee. More and more vendors are starting to understand the importance of offering this vital service, so make sure to look for it during your research phase. At Hippo CMMS we offer initial training and on-going technical support at no charge.

Indirect Costs

The costs associated with changing processes and onboarding staff when implementing CMMS software is often overlooked and difficult to estimate. There is no real way to accurately quantify this number, but it’s important that you dedicate time towards this process. Onboarding will involve several rounds of training sessions with all users over the course of a few months to a year depending on the size of your maintenance team, the extent of advanced features that you want to use, and how drastic a change an automated CMMS will be from your current operations. If you have a team of 40 maintenance staff who have never used a CMMS system, you may find more resistance and a steeper learning curve. Carve out adequate time to integrate a CMMS into your operations and make sure to get feedback from your team every step of the way. For more tips to optimize your training sessions and ensure proper CMMS implementation, read our post here.


There is no question that CMMS software provides value to its users. After all, why else would more and more companies jump on board and pay for a new automated process? The key is to ensure that a CMMS would provide your organization with enough benefit to outweigh its overall costs of time and money. In terms of identifying the costs, concentrate on the dollar value of license fees, setup costs, and administrative man-hours that will be used to help implement the system. For benefits, determine the cost of machine downtime and the importance of increasing the longevity of your assets. A solid system also helps to save organizations both time and money by streamlining processes and reducing the need to sort through paper-based work orders or gather data. Once you’ve determined a CMMS’ cost and benefit, make sure you come out with a positive result. Although this method may not be as accurate as an ROI, it’s sure to give your decision makers the information they need to make a more informed choice.

CMMS 101: 12 Maintenance Software Terms You Should Know

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This article was written by Hippo CMMS and appeared on their blog. We are sharing it because we think the content can benefit people new to computerized maintenance management systems and more experienced users.
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If you are new to the computerized maintenance management software (CMMS) world, you’re likely being inundated with acronyms and terms that are unfamiliar to you. To clear the confusion, we’ve developed a CMMS software cheat sheet outlining 12 common maintenance software terms that are likely to appear during your software search. We hope this list gives you a broader understanding of what’s to come as you get more involved with your CMMS software.


Term #1: CMMS, Computerized Maintenance Management System

CMMS is a database that streamlines and tracks all aspects of an organization’s maintenance operations.  As operations become larger and more complex, the need for a centralized database and access to key information increases. CMMS software assists maintenance managers and workers to perform their day-to-day jobs more effectively by providing real-time data on machine and equipment downtime, inventory levels, upcoming scheduled and preventive maintenance, work order status and more.


Term #2: EAM, Enterprise Asset Management

Although the terms CMMS and facility management are commonly used in place of EAM, enterprise asset management is a much broader term.  It refers to software that enables managers to view and control a company’s assets holistically, while optimizing the efficiencies of the entire operation, not just maintenance and facilities management.


Term #3: CAFM, Computer Aided Facility Management

This is software designed to help facility managers optimized the utilization of space and facilities, plan preventive maintenance, better manage reactive maintenance, and improve facility’s management processes. CAFM is a term used more outside of North America.


Term #4: FMS, Facility Management Software Systems

North Americans often use Facility Management Software (FMS) as opposed to CAFM. Both of these terms, however, describe an almost identical system. Facility management software systems come equipped with maintenance management, space management, utilities tracking, inventory management and other tools.


Term #5: MMS, Maintenance Management System

Maintenance management systems refer to manual methods for tracking maintenance operations as opposed to computerized methods. 20 years ago when CMMS was not as common, MMS was a frequently used term. Its use is declining with more companies adopting maintenance management software.


Term #6: PM, Planned Maintenance

Planned maintenance is pretty straight forward. It refers to maintenance activities that have been planned or scheduled in advance. Most often planned maintenance involves routine preventive maintenance tasks or inspections.


Term #7: PPM, Planned Preventive Maintenance

This is just another term for preventive maintenance or planned maintenance. Some call it PPM, so we thought we’d include it in the list. Planned preventive maintenance refers to regular and routine inspection, detection and correction of equipment and facilities in order to prevent breakdown and failure and extend asset life.


Term #8: PdM, Predictive Maintenance

CMMS can help you predict when maintenance will be required. Predictive maintenance forecasts when equipment failure will occur, and allows you to intervene by taking preventive measures. Having a predictive maintenance strategy allows companies to save on maintenance costs, cut costs on parts and supplies and reduce equipment downtime.


Term #9: KPI, Key Performance Indicator

Key performance indicators are metrics used by managers to help them evaluate the performance within the company. CMMS software, if configured and used properly can allow managers and other users to view real-time KPIs on dashboards and reports. Some of these include equipment downtime, labor utilization, work orders completed on time, maintenance costs, and a few more complicated ones listed below.


Term #10: MTBF, Mean time between failures

This is a metric that shows the projected time between failures of equipment or a machine. For example, if a machine broke down after 200 hrs., and the next at 250 hrs., and then at 300 hrs., the MTBF is 250 hrs. Knowing the mean time between failures will help you predict future maintenance. Basically, the higher the MTBF, the better!


Term #11: MTBR, Mean time between repairs

This is very similar to MTBF and often causes some confusion. The MBTR calculation seems to be counting the necessary instances of repairs during a period of time and dividing the latter number by the former. Mean time between repairs differs from MTBF in that MTBF typically counts only how long a machine operates before failure, whereas MTBR includes the time spent on repair, which can have a significant effect on the results.


Term #12: MTTR, Mean time to repair

As you get deeper into your CMMS software you can extract metrics like Mean Time to Repair. It represents the average time to repair equipment. To calculate MTTR take the total unplanned or corrective maintenance time of failures and divide it by the total number of corrective or unplanned maintenance work orders. As you start extracting MTTR you should be aiming to achieve lower figures.


Master these 12 common terms and you’ll be well on your way to finding the perfect maintenance software for your organization. For more information on CMMS software and successful implementation strategies, be sure to check out our CMMS Expert Series or contact a Software Specialist.

Watch your step! Common preventive maintenance pitfalls and how to avoid them.

pitfallPreventive maintenance, otherwise known as scheduled maintenance, is arguably one of the most important features that a CMMS provides its users. Preventive maintenance is a proactive approach to maintenance management, ensuring that assets and equipment are routinely inspected to avoid downtime and increase their reliability. With all the benefits of a PM system, it’s surprising to learn how many pitfalls await account admin’s and system users both before account setup and after. What’s even more surprising is the amount of clients we see who fall into one or more of these common pitfalls and who become complacent with system inefficiency.

That’s why our team of Hippo experts wants to give you the facts about PM. Read on to learn more about common PM pitfalls and how to avoid them.

Pitfall #1: Your database is overwhelmed.

THE CHALLENGE: “Cluttered” and “chaotic” are two words that you never want to use when describing your database. Unfortunately many of us fall into this category by being too ambitious, either scheduling way too many PMs or scheduling them much too frequently. We also overwhelm our database by not utilizing simple features built into the system to alleviate this very issue.Talk about system overload!

TIP #1: Work as a team, select the right equipment/ assets

We recommend getting all organizational stakeholders, from maintenance techs to healthcare workers, involved in determining the equipment or processes that should receive routine maintenance checkups and extra care. With advice from multiple team members, you can create a robust system that works on multiple levels and covers all processes.

TIP #2: Schedule thoughtfully

It’s important to schedule each PM at the right frequency level. Work with your staff to understand the timelines of each task and assign reasonable frequencies to each. It’s great to strive for ambitious goals, but a dose of reality can really help a system stay on track and give accurate information. If you’re still unclear about the correct frequency of a task, a more standardized approach may be needed. In large organizations such as hospitals and manufacturing complex’s, one of those approaches is to utilize a risk ranking system. The system assigns a risk score to each piece of equipment based on a specific criteria set. In healthcare this set usually includes equipment function, failure risk and past maintenance history. Take time to determine your own additional criteria so that you have an accurate risk score. Equipment with higher scores will be scheduled more frequently (daily or weekly), while equipment with lower scores will be scheduled less frequently (monthly or semiannually).

TIP #3: Make it easy on yourself, close it out!

Make sure your team is closing out their work orders when completed. We often find the biggest reason why clients have copious amounts of overdue PMs is not that their staff hasn’t done the work, but because they have forgotten to tell the system the task is completed. Make sure each person who interacts with the system is properly trained and comfortable with the CMMS. A little knowledge can go a long way in maintaining an accurate system.

Pitfall #2: Your processes aren’t as efficient as they could be.

THE CHALLENGE: A good CMMS has some simple features that, when utilized, become huge time savers for both the administrators who set up the system and the maintenance techs who complete the work. We often see inefficiencies such as an uneven distribution of workload and too much time spent on creating multiple PMs. Prevent your system from becoming more of a burden than a blessing by following the tips below.

TIP #1: Know your software, utilize basic PM functions

For starters, the “generate multiple” feature has several nifty functions to make a system more efficient. If you have hundreds of pieces of the same type of equipment, they probably need to be serviced the exact same way.  It would be tedious and a waste of valuable administrative time to create a separate PM for each piece of the same equipment, as each would contain the exact same task checklist and parts associated with the particular model. If you use the “generate multiple” feature, you need only create one PM associated with all equipment. This robust feature also lets you track all equipment information separately, such as maintenance history, work order progress, additional comments, etc., allowing you to leverage the time-saving benefits without compromising detailed tracking and accurate reporting.

So as not to overwhelm one resource while under utilizing another, “generate multiple” lets you reassign each piece of equipment to a different maintenance tech. This is particularly helpful if the equipment is multifaceted and requires different vendors to service its different components.

“Floating” or “shadowing” is a feature that prevents another PM from generating before the first one is completed. Without it, there are huge implications if a PM is set to generate each day but hasn’t been closed out in a long time. Make sure to check off these boxes to easily gain the benefits of these simple tools.

Pitfall #3: Your data analysis falls short.

THE CHALLENGE: Once you get over the initial hurdles of generating timely and efficient PM schedules, the next step is to ensure adequate tracking of information and accurate data reporting. One of the main reasons large-scale organizations implement a CMMS in the first place is to gain detailed analytical insight into their operations. Although you would be hard-pressed to find a manager who doesn’t believe in the benefits of data reporting, you might be surprised how many do not report on the right data.

TIP #1: Reporting is key, but targeted reports are better

Since a CMMS can report on all of your asset information, it is important to use a targeted approach to provide you with an in-depth analysis instead of a general overview. To do this, one must first set measurable objectives — things the organization wishes to achieve or better understand about its processes. It is important to work with key players in different departments to determine goal priorities. From this point, determine your key performance indicators to track these objectives and run your reports accordingly. Monitoring the progress of your objectives is critical in achieving success. It can also highlight potential pitfalls, allowing you to correct a process before it becomes an issue.

When we spoke with one of our clients, Armtec Infrastructure Inc, they told us about the importance of their PM system. Leo Logashov, the National Operations Excellence Manager at Armtec during this process, explained, “Seeing if something is overdue gets management’s attention. We run current work order reports to see open PM’s, overdue PM’s and how many days overdue they are. It tells us what each plant is doing, which is what management really cares about.” To learn more about Armtec’s client success story, click here!

TIP #2: All good things take time, so give it some

Finally, it is important to leave enough time to perform thoughtful analysis and gather the right data. Administrators can be so busy fulfilling their maintenance responsibilities that higher-level performance analysis is left behind. Make sure that you carve out adequate time to analyze data and pull good information from your CMMS. To make this a little easier, utilize the scheduling function that automatically generates and sends reports at a predetermined frequency. You’ll definitely get brownie points from management when they open their emails on Monday morning to find a simple PM report on last week’s activities.

With any sophisticated software, potential pitfalls may exist that make your work routine more difficult than it has to be. By giving a little love to your system during the setup process, utilizing helpful features to organize your PM scheduling and creating objectives ahead of time to analyze the right data, you can not only avoid these pitfalls but also optimize your system and truly increase maintenance efficiency.

To learn more about Hippo CMMS and how we can improve your preventive maintenance program click here .