CMMS ROI – Return on Investment

CMMS ROI – Return on Investment

Question:  I know CMMS Software will be a big help to my maintenance department, but my boss wants to know what the return on investment (ROI) will be before he spends any money on CMMS Software.  How can I obtain a reliable ROI figure?

Answer:  You’re correct –  CMMS software will help any maintenance department.  In order to quantify the help, you need to look at your operation and the areas that will benefit the most from a system.

CMMS software will help save money in a number of ways.  You will want to investigate those that will provide the largest savings in the shortest time.  The other areas will provide additional real savings, but will take more time to document than is necessary to easily justify your CMMS system acquisition.

Some of the larger cost savings that result from implementing a CMMS system can usually be found in the following areas:

  • Labor Costs:
    • Direct Maintenance
    • Direct Overtime Maintenance
    • Overtime Production/Staff
    • Outside/Contract
  • Replacement Parts
  • Downtime/Lost Availability
  • Equipment Replacement
  • Reduced Scrap/Rework
  • Customer Turnover/ Dissatisfaction
  • Other Costs

Surveys* have consistently shown a 10% to 20% reduction in maintenance labor costs, and a 10% to 15% reduction in parts cost after implementation of a CMMS system. (*Thomas Marketing Information Center.)  Some of our clients have reported as much as 50% savings in the first year.

CMMS software is available in the $1,000 to $10,000+ range.  A company with a maintenance budget of $10,000 to $100,000 can, conservatively (10%), see full payback in less than a year.  Your actual savings will likely be much higher.

Question: I can see how to calculate the savings, but what’s behind the figures?  Can you expand on the cost saving so I can explain the concepts to my boss?

Answer: It really boils down to the fact that planning ahead for maintenance prevents many service calls, allowing your staff to work at a planned pace, preventing breakdowns instead of constantly putting out fires.  When you can plan your day, you can bring required replacement parts with you, check any drawings or documentation before the unit stops working, and plan for the work to be done when it does not interrupt critical processes.  How many times have critical components failed when you need them the most?  At this point your boss should be able to see that your cost savings directly impact his bottom line!

Question: OK, I’m convinced, but what about the time and cost to implement a CMMS System – I’ve heard that can be very expensive?

Answer: You’re exactly right! Here’s where you need to be very careful in your selection of a system.  No matter what the size of your organization, implementation and training can be a real drain on financial and personnel resources.  Look for a CMMS system that is easy to install, simple to operate, and can expand modularly when you need it to. Some systems, in fact, are simple enough to use that they do not need formal training.

COGZ Systems, LLC