Controlling costs

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Maintenance cost control is difficult to achieve. Its activities are often driven by the demands of others, and managers can be blissfully ignorant of opportunities to rein in costs and control expenses.

Research shows fewer than 40% of work orders are done and posted correctly because too many managers don’t know how to effectively close them out in accordance with proper accounting standards.

You may ask, “Are not EAM/CMMS software programs supposed to do this automatically by supplying comprehensive system support guidelines?”

Apparently for many, the answer is no, says Mark Goldstein, a long-time maintenance practitioner, author, lecturer andprincipal of Manufacturing and Maintenance Associates Inc. in New Jersey.

Goldstein says posting accurate maintenance work order costs to the right equipment reduces plant maintenance budgetary outlays by 15% to 40%. Real world cost control occurs when enterprise management objectives are supported by comprehensive decision-support guidelines, but many EAM/CMMS programs do not meet this expectation.

Christer Idhammar, who started his successful results-oriented reliability and maintenance consulting company IDCON Inc. 41 years ago in Sweden and brought it to North America in 1985, says people can’t be more effective than the system allows them to be – which isn’t much in most cases.

Take inventory control. Overstocks, understocks, costly interruptions of maintenance work due to “empty cupboards,” expensive last-minute calls, air-express charges and paying outrageous premiums for parts are only the beginning of how outdated tactical methodology to manage maintenance, repair and overhaul (MRO) inventory costs you.

Another area is material shrinkage. Goldstein stresses the importance of having an answer for the ultimate MRO question: “who stocks what, where, and at what price to whom?” Knowing that delivers sizeable reductions in MRO inventory.

The CMMS work order process is capable of accumulating costs against each work order and roll up total cost to the equipment level, the system level, and the plant level. With small adjustments, the CMMS also tracks the cost of failure.

Tracking costs
To track exactly where maintenance costs were incurred, Ben Stevens, principal of DataTrak Systems Inc., a Godfrey, Ont. firm that specializes in CMMS and EAMs, recommends you include manpower and contractor rates in the set-up; do the same for materials, consumables and spare parts costs; and charge special tools to the work orders. Monthly cost reports should show the level of expenditure for major piece of equipment, system, plant or site with each type of maintenance activity. These monthly cost reports should cover the cost of repair, lost operating time, penalties and lost public image. Such reports show variances from the plan and can be used to set the next year’s budget.

Adjusting the supplier invoice also saves money. Write a debit memo price adjustment; contact the supplier to prevent future discrepancies and communicate with purchasing and accounts payable to reduce the costs of “supplier errors.”

Controlling costs may not be easy, but there are many ways to do so using the proper tools and with the understanding that it’s everybody’s business.

Steve Gahbauer is a Toronto-based business writer and a regular contributing editor. E-mail gahbauer@rogers.com.

Find this article in the April 2014 issue of PLANT.