How much should I budget for maintenance for my equipment?
Answered July 31 2019
You should budget approximately 2% to 5% of your total replacement asset value (RAV). This metric, known as %RAV, is calculated as a proportion of your facility’s value and spending. %RAV is a guiding KPI that aids facility and maintenance managers. It helps determine when it is appropriate to spend money on maintenance, versus when it is time to buy a new asset all together.
Use Equipment Cost as Your Baseline
One of the less obvious facets of maintenance cost is equipment cost, which involves anything from spare parts and consumables to entirely new assets.
When we look at equipment cost, we’re also looking into how much it costs to have these pieces of equipment serviced (whether that be by the facility maintenance team or by the equipment vendor). It also accounts for the lifespan of the asset, since maintenance costs will probably go up as the equipment gets older. Lifespan and equipment cost are therefore inverse functions, meaning the equipment budget within a maintenance budget constantly evolves.
Maintenance as a Percent of RAV
One way to quantify equipment cost is to look at maintenance cost (MC) versus the replacement asset value (RAV) of your equipment (expressed as a percentage, %RAV). Essentially, we are comparing how much it costs to make repairs, perform routine maintenance, and replace parts on an asset to how much it costs to replace the entire asset wholesale.
A %RAV between 2 and 5 percent allows maintenance planners to estimate the amount of money necessary for equipment maintenance because that amount of money shouldn’t exceed the facility’s %RAV.
Some important things to note:
- %RAV isn’t a hard and fast rule for every industry. This means that some industries need to budget more money than others for their equipment because their equipment naturally costs more or requires more intensive maintenance. That’s okay – just make sure you understand a world-class %RAV for your industry.
- It’s possible to have a very low %RAV and still be inefficiently performing maintenance. For example, a low %RAV could be achieved by cutting all but one maintenance technician in a facility. This is obviously not a good solution. As such, tracking %RAV over time helps a facility understand how its maintenance costs need to change (and how much more or less money they need to allocate to equipment costs).
- It’s also important to continually evaluate the lifespan of your equipment. %RAV should never be a static figure, which means your equipment costs can increase or decrease over time in a 20-year plan. Account for these things by understanding the specifics of your assets.
Latest Maintenance Articles
- Root Cause Analysis Techniques and FundamentalsHow to Use eBay to Save Money and Time on ProcurementThe Ultimate Guide to Programmable Logic Controllers (PLCs)How to Respond to an FDA Warning LetterWhat Is Maintenance Process Mapping?Checking for Fever: A Comprehensive Guide to Implementing a Temperature Screening System
Fleet Management and GPS
Oil & Gas
Asset Management Questions & Answers
Root Cause Analysis Techniques and Fundamentals
Root cause analysis (RCA) is key to a successful maintenance program. But to conduct one effectively, it’s critical to understand the components required.
What Is Maintenance Process Mapping?
Without effective maintenance process mapping, an organization will never achieve stable maintenance processes. Learn what you need to know here.
CMMS vs. Asset Management: A Guide to Bridging the Gap
Without a strong background in CMMS and asset management, there is a good chance that you'll only end up with an expensive work order ticket system.
8 Steps to Implementing SOPs in Your Maintenance Team
Implementing standard operating procedures (SOPs) may be a challenge. In this article, we’ll discuss various aspects of how to tackle this challenge.
What Is a Standard Operating Procedure (SOP)?
A standard operating procedure, or SOP, is a document that lays out the steps to do something in a clear and concise way.
SCADA Systems Explained | Onupkeep.com
SCADA is a computer control system used to monitor and control plant processes. It uses data communications and more to monitor systems.
What are different types of food and beverage processing equipment?
We've compiled every type of food and beverage processing equipment out there in a list with everything you need to know.
What Is Straight Line Depreciation, and Why Does It Matter?
Straight Line Depreciation is an accounting method, and accounting is not the first thing you might associate with maintenance.
7 Metrics You Should Be Tracking for Maintenance Inventory
To get the very most out of your MRO (maintenance, reliability, and operations) inventory, you need to track data that reflects costs, turnover, etc.
What is Asset Management & ISO 55000?
An asset is any item that has potential or actual value to the company. Asset management is an approach to achieve the most asset value.
What’s a function and what’s functional failure?
A function describes the intention of a piece of equipment, while functional failures detail conditions that would prevent equipment from peak operation.
What is asset management? What are the top asset management certifications?
Asset management is generally defined as a system of activities that an organization performs to gain value from assets, including design and maintenance.
What are maintenance tasks to perform on indoor cycling bikes?
Maintenance tasks for indoor cycling bikes include daily, weekly and monthly cleaning, inspection, and adjustments to ensure strong durability.
What are some types of assistive devices and how are they used?
Assistive devices help individuals with disabilities live a more independent life by using technology and increasing everyday accessibility.
What is a Purchase Order and What to Include?
Purchase orders (POs) are created to start a purchasing relationship with an outside vendor. POs include quantity, delivery schedule, and payment terms.
What is maintenance management?
Maintenance management is the process of maintaining a company’s resources. It ensures efficient production and effective use of resources.
What are the most common ISO standards for manufacturing facilities to follow?
The most common ISO standards to follow for manufacturing facilities are ISO 55000, 55001, and 55002. All require an asset management system.
What is a bathtub curve?
A bathtub curve is a visual of a product's failure rate over time that maps out three periods that an asset experiences within its lifetime.
6 Interesting Facts About Equipment Failure
When it comes to equipment failure, there are a few interesting trends that we see. We can see some of the challenges effective reliability planning.
What are the phases of a turnaround maintenance procedure?
In maintenance, a turnaround is an event where one or more assets are temporarily removed from service so that maintenance tasks can be performed.
What is a fixed asset?
A fixed asset is one of two major categories of physical property for a company and includes those items that remain in one location during business operation.
What are the most common root cause analysis (RCA) mistakes and how do I avoid them?
Some of the most common root cause analysis mistakes involve poor definitions, focusing on the wrong thing, or ignoring root causes entirely.
How do I conduct a thorough root cause analysis?
For root cause analysis to be effective, you need to dig deep, have the right resources, and ask “Why?” until you get to a root cause.
How to Measure Inventory Performance with Inventory Management Metrics
To measure performance in inventory management, one of the most common metrics to use is “number of inventory turns" and target a value greater than 1.0.
What is the importance of collecting equipment failure data?
The collection of equipment failure data over time determines the reliability of your facility and enables proper asset management and life-cycle analysis.
Which root cause analysis (RCA) method should I use?
Of the numerous RCA methods used, the one you choose depends on the depth and nature of the problem, as well as the number of contributing causes.
When should I repair or replace an asset?
In order to decide if it is time to repair or replace an asset, you must compare the current value of the asset with the cost of repair.
What is Equipment Depreciation? Why it Matters + How to Calculate
Equipment depreciation is a measure of how much a piece of equipment drops in value each year. Using depreciation, you can make wiser maintenance decisions.
What is an asset life cycle?
An asset life cycle refers to the stages involved in the management of an asset. The life cycle of an asset starts with the planning stages.
What is the difference between availability and reliability?
Availability measures equipment's ability to operate, while reliability measures the ability of equipment to perform without failure.
What’s idle time and how does it differ from downtime?
Idle time is the time in which an asset is either waiting to run or isn’t scheduled to run and downtime is when the asset is incapable of running.
What is the difference between criticality and risk analysis with regards to maintenance and reliability?
Criticality is a measure of how important an asset is to your process. The more critical the asset, the more of an impact it will have if fails.
What is the difference between total effective equipment performance (TEEP) and overall equipment effectiveness (OEE)?
Overall equipment effectiveness (OEE), the most common metricperformance of a plant, is expressed as a percentage of the total production time.
What are leading and lagging metrics in maintenance?
Indicators are classified according to whether they predict future performance or describe past performance –- referred to as leading or lagging indicators.
What are ways to improve my equipment uptime?
There are numerous ways to improve your equipment uptime, each of which has to do with streamlining your maintenance processes.
What are the best metrics and KPIs for manufacturing companies?
Downtime and uptime are the heartbeats of a manufacturer - when the facility has too much downtime, the health of the organization suffers.
What’s the difference between downtime and breakdown time?
Breakdown time is downtime that results from the equipment breaking down. Equipment downtime is any time a piece of equipment is offline.
What are the maintenance costs associated with one unit of production?
The maintenance unit cost is a snapshot of the total maintenance cost required to manufacture a standard unit of production during a set period of time.
How would I implement a total productive maintenance program?
When implementing total productive maintenance (TPM), I think it’s best to gradually phase it in. It will enable an organization-wide adjustment over time.
What is the best way to use failure codes for root cause analysis?
Use failure codes systematically: start with analyzing the reasons for failures, code this information in a consistent way, and make it accessible.
What are the five pillars of maintenance and reliability?
The SMRP identified five pillars of maintenance and reliability to help facility managers create a framework for their businesses.
How much should I be spending on maintenance for industrial equipment and assets?
One such goal is to strive for spending 3 percent or less of your replacement asset value (RAV) annually on maintenance costs. Here are the details.
Should I use barcodes or RFID tags to track my equipment and assets?
Both bar codes and RFID tags can help you track your assets and equipment; and each has its own unique advantages and disadvantages.
Useful life of an Asset: Definition & Examples
IRS Publication 946, Appendix B, lists useful life estimates by industry and application. These estimates can be used as a baseline.
What do I do with old industrial equipment?
Either you replace old equipment, or you keep it around. The route you choose depends on your facility’s current demands.
What is the difference between PLC and SCADA?
The primary difference between a PLC (or Programmable Logic Controller) and SCADA is the fact that a PLC is hardware and SCADA is generally software
What are the dangers of using the mean time between failure (MTBF) metric?
When MTBF is presented you cannot instantly ascertain whether the metric is being influenced more by the uptime duration or by the number of breakdowns.
Is maintenance cost to asset value ratio a good maintenance metric?
The short answer to the question is generally “no”. However, asking the question sets into motion the bigger issue of how to evaluate any metric in facilities management.
What does a good electric motor testing program look like?
Implementing a good electric motor testing (EMT) program can be a massive positive investment in the reliability of a facility's equipment.
Am I spending too much (or too little) on maintenance activities?
A common metric is taking the total maintenance cost (MC) as a percentage of the estimated plant replacement value (PRV).
When do I need to hire a reliability engineer? How does reliability affect safety?
If you want to take proactive steps towards maintenance and you have enough data to analyze, you can benefit from hiring a reliability engineer.
How do you implement an asset life cycle management program?
Implementing a stellar asset life cycle management program requires alignment with your business strategy, data-driven decisions, and the right culture.
What are the 8 kinds of waste in Lean Six Sigma?
All continuous improvement programs and computerized maintenance systems strive for the common goal of reducing this waste as much as possible.
How can you achieve world class manufacturing reliability?
World-class manufacturing facilities successfully stay ahead of breakdowns, achieve higher asset utilization, reduce maintenance costs, and increase safety.
How can you make rotating equipment operate better, for longer?
To answer that, we should first understand exactly what causes rotating equipment to fail. The majority of failures come down to unbalance and misalignment.
What mistakes do maintenance teams make when lubricating bearings?
Overall, the main mistakes I’ve seen with lubricating bearings have to do with either too much lubrication or too little.
What makes a reliability engineer great?
Finding causes of problems can be tricky, and convincing maintenance technicians to accept new practices can be even trickier. Here are some ideas to help:
What are common mistakes reliability engineers make?
Reliability engineering is a complex process with lots of room for potential errors, lost time, and wasted money. Stay forward thinking and proactive.
What are common misconceptions about plant maintenance?
More people on maintenance staff doesn't necessarily reduce problems. In fact, it creates another kind of problem in terms of ineffective resource use
What are the benefits of infrared imaging?
Infrared analysis is actually super useful for checking temperatures, especially when you're comparing the temperature of an asset to another asset.
What mistakes are common with reliability-centered maintenance?
While RCM seems simple on its face, there are a huge number of moving parts within any solid reliability-centered maintenance plan that could go wrong.
When should I perform preventive maintenance on equipment?
Begin by checking the OEM manual. This will typically provide you with preventive maintenance guidelines. dffdadfdsfasdfasdfasdf
How do you track asset depreciation?
In order to track asset depreciation, you'll use its annual depreciation. The formula is (Initial Cost - Salvage Value) ÷ Useful Life = Annual Depreciation.
How do you determine which machines should receive preventive maintenance?
Selecting machines for preventive maintenance is a matter of finding which ones would benefit most from PM while keeping maintenance costs down.
Where should you store equipment manuals and warranties?
A CMMS is a great way to organize user manuals and warranties by asset. Upload them and they’re ready to view by anyone with access.