COST ACCOUNTING

A CMMS (computerized maintenance management system) can be one of the easier pieces of software to cost justify. This is not to say that every company should have one. Rather, the benefits are real and tangible; savings that you can take to the bank. You should analyze current maintenance practices, determine percentage of downtime, calculate yield loss, and loss revenue. Even if this information paints a rosy picture, you would want to look at your inventory carrying costs. Perhaps you are overcompensating for potential lost productivity due to equipment outage by stocking more inventory that is needed. The fact that you don't have the data to perform the above analysis may be a hint that your company needs a CMMS.

As we stated above, deciding whether to repair or replace a piece of equipment is a common problem facing many companies. With a CMMS, historical information about a piece of equipments performance is only a few clicks away. This historical information allows you to intelligently, and with justification, compare costs of maintaining versus replacing.

We take it for granted that a CMMS will produce the work order for a scheduled or unscheduled preventive maintenance or repair. Assuming the CMMS database is accurate and current, the CMMS generated work order should reduce the amount of data entry needed to capture information. Using the theory of negative confirmation, similar in principle to a picklist confirmation, only the exceptions to the work order need be entered. This would include additional parts consumed but not scheduled; parts scheduled but not consumed; and hours worked in addition to or less than estimated time to complete.

Another decision-making tool available in a CMMS is visibility as to what is not getting done via a backlog report. Accordingly, you can adjust and reset priorities. In a paperless CMMS environment, when you encounter a problem with a piece of equipment, you don't have to go hunting through file cabinets and dog-eared stacks of paper to find such things as warranty information. Instead, the warranty information becomes part of the equipment database, possibly eliminating or reducing vendor charges.

A CMMS allows you to evaluate the effectiveness of your preventive maintenance program. Performing preventive maintenance does not automatically guarantee that equipment will run longer and better. With the historical information maintained in a CMMS you can correlate the preventive maintenance with downtime. If your preventive maintenance does not reduce downtime, you may need to re-think it. In addition to preventive maintenance, a CMMS can remind you to perform inspections required by law. Finally, many insurance companies have recognized that the proper and faithful use of a CMMS can reduce the chance and frequency of costly insurance claims. Your facilities are safer because maintenance work gets done properly and reliably. Recognizing these benefits, insurers may pass along these savings in terms of lower premiums to companies that use a CMMS. In this case, your company is actually getting a double hit; internal savings through cost reductions and external savings through lower premiums.

At year end, a CMMS can assist you in preparing a more accurate budget, cutting spare part costs due to overstocking, and spreading maintenance dollars to more critical pieces of equipment. This information can also enable you to take advantage of volume and seasonal buying discounts.

How you rank these benefits in terms of return on investment (ROI) will depend on your company. However, with your detailed knowledge of the company, these benefits may be just the tip of iceberg.

This is Part Two of a two-part note.

Part One discussed the Challenges and Features of a CMMS.

Interfaces

Depending on what applications you have installed and how seamless you want a CMMS to fit into your systems architecture, the complexity and number of interfaces can be significant. The chart below lists potential interfaces by functional area.

Of the above interfaces, the functional areas of purchase requisition, cost accounting, and, most definitely, inventory, typically require construction of interfaces. When performing your cost/benefit analysis, the estimates for the interfaces needs to be added to the cost of acquiring the CMMS software.

Summary

Interesting how we use CMMS in our everyday lives. Ever notice that warning light in your car that goes on when service is needed. Why would you not want the same type of notification on your equipment that generates revenue and covers your salaries?

Clearly, a CMMS is an excellent business opportunity whose implementation can significantly improve operations, reduce equipment downtime, increase accountability of the maintenance functions, and produce substantial financial savings.

The old ways of managing the maintenance function do not work anymore. The use of everything from index cards, pegboards, and white boards is cumbersome, ineffective, and unreliable. What's more, these low-tech tools were used inconsistently and irregularly, further reducing whatever minimal benefits they may have been expected to achieve. A computer-based system such as a CMMS is not only a much better solution, it is a more practical and realistic one.

SOURCE:http://www.technologyevaluation.com/research/articles/computerized-maintenance-management-systems-a-tutorial-part-two-benefits-and-interfaces-16999/