8/3/2019 Calculating a CMMS System Roi

http://slidepdf.com/reader/full/calculating-a-cmms-system-roi 1/3

   P   r   i   n   t   e   d   w   i   t   h

     j     o     l     i    p    r     i    n     t

mintek.com

Need Help in Calculating a CMMS SystemROI?

When considering the purchase of enter-prise level physical asset and maintenance management software the driving factor

should be determining what type of return you will

receive for your investment (ROI).This article willbriey discuss the more important ROI elements aswell as how to use a ROI calculator to estimate thecash ow impact of a CMMS system.

Maintenance, Energy andDocuments ROI

The ROI that is calculated should be based upon acombination of savings generated from each crucialcash drain area such as maintenance, energy ordocuments management. Each of these areas can besignicantly impacted by a properly implementedCMMS system.

Maintenance

Maintenance is one of the core functions of everyasset intensive industry ranging from amusement

parks to wastewater utilitiesbut also includes assetsmanaged by Federal, State and Local governments.CMMS systems are an important tool for changingreactive maintenance programs into ecient proac-tive work management operations.

“As a general rule, for every dollar spent onpreventive maintenance, you will save at leastve dollars in subsequent expenses.”

Source: Kansas State University

Good work management practices include the plan-ning and scheduling of preventive maintenance,inspections, repairs and the exibility to handleunscheduled maintenance as it arises. These mainte-nance practices can bring in between 12 and 18% incost reductions for organizations relying on reactivemaintenance.

The ROI math is (Annual maintenance costs) x (%savings)= Maintenance savings

Further expense reductions using a CMMS systemcan be realized by increasing the mobility of mainte-nance staff. Increasing mobility is employing the useof mobile handheld devices that reduce the amountof time lling out paperwork for work managementtasks.

“Hospitality IT decision makers have madeit clear that mobility is no longer an optionbut a necessity to survive in an increasinglycompetitive market… Motorola’s hospitality

28/10/2011 22:01

http://www.mintek.com/blog/eam-cmms/calculating-cmms-system-roi/

 Page 1

8/3/2019 Calculating a CMMS System Roi

http://slidepdf.com/reader/full/calculating-a-cmms-system-roi 2/3

   P   r   i   n   t   e   d   w   i   t   h

     j     o     l     i    p    r     i    n     t

mintek.com

Need Help in Calculating a CMMS System ROI?

barometer indicates that the mobilization of key applications enables organizations to saveor recover a daily average of 44 minutes peremployee”

Source: Frank Riso, Motorola

The ROI math is (# employees) x (hourly rate) x (#of workdays per year) x (minutes saved/60)= Time

saved by mobile software.

Energy

Energy use in commercial buildings often accountsfor more than 25% of operating costs. In some in-dustries, such as Hotels, it is not uncommon for amoderate size hotel to spend $1 million annuallyon utilities (gas, water and electric).

“On average, America’s 47,000 hotels spend

$2,196 per available room each year on energy.This represents about 6 percent of all operatingcosts. Through a strategic approach to energyeciency, a 10 percent reduction in energyconsumption would have the same nancialeffect as increasing the average daily roomrate (ADR) by $0.62 in limited-service hotelsand by $1.35 in full-service hotels.”

Source: EnergyStar

Although each type of facility varies, HVAC is clearlyone of the major opportunities where substantialenergy savings can be found. Regularly scheduledcleaning or changing of lters, corrosion inspectionsand other preventive maintenance techniques allowHVAC equipment to operate at maximum eciencyusing between 15-20% less energy.

The ROI math for a hotel is (# of rooms x energycost per room) x (the amount of energy reduction)= HVAC energy savings

Document Storage and Handling

The costs of document management is one of themost overlooked expenses for organizations. Muchof an organizations documents are a result of as-set purchases and include items such as contacts,warranties, vendor information, blueprints andschematics.

“Companies spend $20 in labor to le a docu-ment, $120 in labor to nd a misled docu-ment, and $220 in labor to reproduce a lostdocument.”

Source: Coopers & Lybrand

Document handling costs may include storage, co-pying, search and retrieval as well as distribution.For most organizations determining the amount of time spent on each of these activities is an adminis-

trative nightmare. Fortunately, there has been a lotof research already done which indicate that costsassociated with document handling can be brokendown as follows:

• Services, supplies and Space – 11%• Space and equipment – 19%• Labor 70% -

An CMMS document management tool can reducethe costs associated with asset management by al-lowing any document to be scanned and attached toan asset. Documents can then be retrieved or sentwith a work order at the push of a button.

“U.S. managers spend an average of 4 weeksa year searching for or waiting on misled,mislabelled, untracked, or lost papers”

Source: AIIM, Forrester, Star Securities, US Department of Labor

28/10/2011 22:01

http://www.mintek.com/blog/eam-cmms/calculating-cmms-system-roi/

 Page 2

8/3/2019 Calculating a CMMS System Roi

http://slidepdf.com/reader/full/calculating-a-cmms-system-roi 3/3

   P   r   i   n   t   e   d   w   i   t   h

     j     o     l     i    p    r     i    n     t

mintek.com

Need Help in Calculating a CMMS System ROI?

The ROI math for document storage and handlingis (cost of lost documents + the costs of misled do-cuments)

A More Detailed Look at ROI

The ROI calculations shown above are simple viewsand do not include many of the intangible costs as-sociated with a true investment decision. However,

when the three areas of maintenance, energy anddocuments are combined they do provide a goodestimate of the savings potential of implementinga CMMS system.

For more information on each of the three areas wehave prepared a presentation for you that looks alittle deeper into maintenance, energy and docu-ments savings potential with an CMMS.

If you liked this article you may also enjoy reading:

CMMS, EAM Documents, energy, maintenance ma-nagement

Did you like Need Help in Calculating a

CMMS System ROI??

Every share you make allows us to write more greatstuff for you:

• It’s how we prove that it’s worth blogging toour bosses. Researching and writing takesserious time.

• I happen to get a free lunch for every postwith 10 shares... I really like free lunch.

• The whole oce gets free lunch for everypost with 100 shares.

• I also like seeing our stuff on the internet. You have to admit it’s really cool.

28/10/2011 22:01

http://www.mintek.com/blog/eam-cmms/calculating-cmms-system-roi/

 Page 3