To lower operating costs, it’s important to identify inefficiencies in the production of goods or services.
When it comes to maintenance, the chief inefficiencies are:
- unexpected downtime,
- lengthy repair times,
- over/understocking of spare parts,
- a lack of information on repair costs and activities.
Properly deployed maintenance management software (CMMS) can eliminate these inefficiencies. You can schedule preventive maintenance to shorten downtime and monitor stock. This ensures that technicians have the parts they need to carry out repairs promptly and to monitor costs and maintenance activity from anywhere.
However, quality maintenance software isn’t free. While some companies offer free CMMS software trials, it takes time to implement them properly and money to buy them.
So it comes down to one question: what is the return on investment from a CMMS?
The return on investment (ROI) measures the profits yielded or losses incurred on an investment relative to the amount of money invested. The return on investment is usually expressed as a percentage and is commonly used for making financial decisions, comparing a company’s profitability or comparing the effectiveness of various investments.
This article will help you answer this question.
How do you calculate the ROI of a CMMS?
When looking at maintenance management software, the formula below can be used to calculate a company’s return on investment:
CMMS ROI = (VALUE-COST/COST)
Step 1: consider the gain in value
If you don’t have the time to run through the exercise of determining the full return on investment of a CMMS, you can cite the results of the following studies. In each case, the ROI of a CMMS correlates with the ROI of preventive maintenance, since the CMMS can put preventive maintenance activities on autopilot.
A company can save 12 to 18% of the costs normally associated with repair costs and corrective maintenance by undertaking preventive maintenance.
A few studies have been carried out in an effort to quantify the gains achieved by using a CMMS. In 2002, the AFIM (French Association of Maintenance Engineers) summarised some numbers that we can corroborate from numerous customer experiences:
- reduction in time spent preparing for work = -20% to -30%,
- reduction in time spent on maintenance = -10% to -30%,
- up to 50% increase in the service life of equipment,
- decrease in value represented by stock = -10% to -20%,
- 5% improvement in the purchasing cycle,
- reduction in production downtime = – 10%,
- optimisation of subcontracting agreements,
- improvement in machine availability.
The performance that can be expected from a CMMS varies according to the sector in which the company operates.
Calculating the CMMS’ ROI is highly dependent on the company’s ability to break down pre-CMMS maintenance costs. This process is often complex because little or no information is known.
It is very likely that the gains will be much higher during the initial years of CMMS operation. In all cases and when the CMMS is properly implemented, considerable gains are achieved.
Step 2: assess the costs of a CMMS
There are four main costs to consider before purchasing a CMMS:
- software licences,
- implementation and user training,
- support and upgrades,
- necessary equipment (computers, mobile devices).
Many of the costs mentioned will vary depending on the maintenance management options and the chosen supplier. Some systems offer a Cloud access mode, requiring no software installation – like our DIMO Maint MX solution.
Likewise, a number of companies offer basic customer support and charge additional fees for upgrades. Implementation and user training costs also vary depending on whether clients undertake these tasks themselves or whether they hire a supplier to carry out equipment and asset audits and/or on-site user training.
A CMMS will typically require computer access, with many suppliers also offering access on mobile devices. When considering the total cost of maintenance management systems, business owners need to keep in mind what equipment is available and the time and labour required to deploy the software versus the costs associated with additional services provided by a supplier.