How to Calculate the Cost, Value, and ROI of a CMMS
Senior management is always looking for ways to increase a company’s profit margin and overall value. Some companies increase prices to make this happen; smart companies find other solutions. One of these solutions is reducing operating costs while creating the same output or more.
How do you actually do this? You start on the ground floor. You look for inefficiencies in production. When speaking about maintenance, major inefficiencies include unscheduled downtime, a high time-to-repair, and limited insight into reparation costs and activity.
When implemented correctly, a computerized maintenance management system (CMMS) can eliminate these inefficiencies. You can schedule preventive maintenance (PMs) to reduce downtime, track inventory to ensure technicians have the parts they need to make timely repairs, and view/log maintenance costs and activity from anywhere.
Good maintenance software doesn’t come free though. It takes time to implement and money to purchase. So the question becomes: What is the ROI of a CMMS?
Below, we’ll help you answer that question.
The ROI of a CMMS
The formula for CMMS ROI is simple: (CMMS value – CMMS cost) / CMMS cost
According to this equation, you need two numbers to calculate the ROI for a CMMS: the cost of a CMMS and the value of a CMMS. The first is relatively easy to find, the second is harder. But it is doable.
If you don’t have time to perform the exercise of determining the full ROI of a CMMS, you can cite findings from the following studies. In each case, the ROI of a CMMS is correlated with the ROI of preventive maintenance since the CMMS can put PMs on autopilot.
- A company can save 12% to 18% of the costs normally associated with repair costs and reactive maintenance when it uses preventative maintenance (U.S . Department of Energy).
- Over a 20 year period, a company can receive an ROI of 545% from switching from reactive to preventive maintenance (Jones Lang LaSalle).
- reactive plants typically achieved uptime of around 83.5%. Plants that focus on planning & scheduling, preventive maintenance, and defect elimination achieve 98% uptime (Reliability Incident Management).
In addition to finding relevant studies to cite, you can quickly calculate the ROI of a CMMS based on how it increases the productivity of technicians.
Determine the value of a CMMS
In addition to calculating the value of increasing the productivity of technicians, you can factor in other areas of value.
Estimate administrative productivity.
Perform a similar calculation as you did for technicians above. But instead of using the same productivity percentages as you did for technicians, estimate the productivity for admins. When making this estimation, consider the time saved from removing paper and keeping data in a centralized, searchable system.
Estimate storeroom productivity.
If you have a storeroom that’s managed by a parts manager, estimate an increase in productivity based on how much easier it will be for them to keep proper stock counts. For instance, when a technician adds a part to a work order in UpKeep, the quantity used is automatically deducted from inventory. This updates stock counts in real time.
Parts managers can also quickly create purchase orders with a CMMS. And when the PO is fulfilled, the quantity is automatically updated in the system.
Estimate the cost of failing audits.
Companies in some industries are audited by the government for preventive maintenance processes. If the company can’t provide documentation that it’s maintaining equipment, the company is fined. With a CMMS, you can access PM schedules and historical maintenance records for assets in a few clicks. You can also generate reports/documentation in PDF format to give to auditors.
Determining the cost of a CMMS
There are four primary costs to consider before purchasing a CMMS:
- Cost of licenses
- Cost of implementation
- Cost of onboarding
- Cost of mobile devices
Cost of licenses
To find the cost of licenses, go to the pricing page of the CMMS provider (here’s ours).
You’ll find that many providers charge per user. At UpKeep, we define a user as anyone who needs to create and update work orders or run reports. These are usually technicians, administrators, and managers. People who need request-only or view-only access get free licenses.
For instance, if you chose the professional pricing plan for UpKeep at $49 per month and have five technicians, one administrator, and one manager, the cost of licenses would be $343 per month ($49 per user * 7 users).
Cost of implementation
The cost of implementation can cost time or money upfront. For instance, if you have thousands of assets and need help importing them to the CMMS, the provider will offer this service for a fee. They can also help you organize your system for future success. Smaller companies, however, can usually do this on their own with tutorials and support that is included with the original plan.
In either case, time is required for implementation. Based on your team size and maintenance responsibilities, the CMMS provider can ballpark how long it will take to implement. You can then multiply this by the hourly wage of people who will be setting up the software.
Cost of onboarding
The cost of onboarding is time-based. The question you need to answer is: How many combined hours will it take to onboard our technicians and team to the software? With this information, you can multiply the average hourly salary by the amount of technicians and personnel you need to onboard. Again, your CMMS provider can give you an estimate on how long onboarding will take.
Cost of mobile devices
Finally, there is the cost of mobile devices. This includes tablets and smartphones you’ll need to acquire to leverage the mobile functionality of the CMMS.
For instance, if you have a large plant, you might install tablets throughout the facility so operators can quickly submit work requests when machines go down. Additionally, you might purchase smartphones for technicians or reimburse them for using their personal smartphones to log maintenance activity with the CMMS mobile app.
Start quantifying the value of a CMMS
There’s always a positive ROI for a CMMS if your company does two things: 1) performs a significant amount of maintenance and 2) takes the time to properly implement the software and onboard staff. But you have to quantify this to prove to yourself, and others, that the investment is worth it.
By following the steps above, you can do this. And after you do this, you’ll start experiencing the incredible ROI of a CMMS like many of our awesome customers.
UpKeep lets me list the cost of parts on our work orders. That gives me more transparency into what we’re spending month to the month. And, since everyone on our team has an iPad and can create their own work orders, we can eliminate administration hours. UpKeep is THE assistant we’d otherwise have to pay an additional salary for.
Jonathan Price, Facilities Manager @ Jet.com
UpKeep has helped us reduce our downtime to less than 1%. I cannot overstate how minuscule the fee is compared to maintenance cost savings and up-time productivity.
Larry Sherrer, Maintenance Manager @ McClain Forest Products