While the C-suite might treat maintenance costs as a necessary evil, the ramifications of poor maintenance are far more costly than sticking with a robust maintenance plan. Maintenance costs include labor, parts, tools, and other equipment required to keep assets in optimal condition. For example, in a manufacturing facility, your maintenance costs would include wages paid to maintenance technicians, replacement parts for heavy machinery, and the tools used to repair them.
These costs are necessary because they extend an asset’s useful life. While the costs of preventive maintenance may seem high in the short term, your organization saves money in the long run by preventing asset breakdown and extending the asset’s Mean Time To Repair (how long a repairable asset can run between maintenance intervals) and Mean Time To Failure (overall runtime for non-repairable assets).
Maintenance costs are recorded in the profit & loss (P&L) account and are considered a cost center. However, maintenance plays an indispensable role in business continuity and output. These costs take different forms depending on the asset in question. For example, maintaining a fleet of vehicles is very different from maintaining real estate.
The extent of maintenance on an individual asset depends on its worth, its importance in the production process, and whether or not the asset can be easily repaired/replaced. Low-cost, non-repairable assets (eg: lightbulbs) can be allowed to run to failure without causing unscheduled downtime.
Note: Some maintenance costs are considered overheads because they are required by regulation. For example, government regulations require landlords to maintain living and safety standards—providing heating, cooling, and ventilation—and regular upkeep including snow removal, roof replacement, HVAC maintenance, and mold removal.
What is the best way to reduce maintenance costs?
The best way to reduce maintenance costs is to reduce reliance on reactive maintenance. Proactive maintenance is one of the best cost management strategies. Also, you must train technicians to use machinery properly. When performing maintenance tasks, follow OEM recommendations closely. Improvisation is rarely advisable.
1. Double down on preventive maintenance (and evaluate performance over time)
Reactive maintenance is the most expensive type of maintenance, especially when it leads to emergencies and unscheduled downtime. According to one study, downtime costs can run up to $22,000/minute. Reactive maintenance involves responding to equipment malfunctions after they occur. Worse equipment damage equals greater repair costs.
Left unchecked, a single component can trigger a domino effect of failures that debilitate an entire production line. A 2020 study by Plant Engineering found that 60% of manufacturing companies still perform reactive maintenance, indicating that organizations are bleeding money unnecessarily.
- Preventive maintenance is the practice of scheduling maintenance on an asset ahead of expected failure based on a specified time interval or usage threshold. Maintenance frequency may be determined by OEM recommendations or historical data. Because preventive maintenance is expensive, as it involves servicing an asset regardless of its operating condition, this strategy is typically reserved for the most high-value assets critical to production continuity.
Most organizations use a combination of strategies for different assets.
- Breakdown maintenance involves letting cheap assets that are easy to repair/replace run to failure. However, this constitutes a conscious, cost-cutting decision rather than a lack of maintenance planning.
- Corrective maintenance is a controlled, cost-effective way of maintaining medium-priority or ancillary equipment. This means checking equipment regularly for signs of wear (eg: vibration analysis, oil check) and initiating maintenance as needed.
2. Switch to predictive maintenance
Preventive maintenance may lead to over-maintenance because maintenance follows a set schedule regardless of asset condition. Predictive maintenance uses historical data to calculate the ideal maintenance interval based on prior equipment failure. Sometimes, assets on a preventive maintenance plan fail before scheduled maintenance is due. Predictive maintenance reduces the chances of error. More importantly, it automatically adjusts maintenance intervals as the asset ages—an important feature seeing as older assets require more frequent maintenance.
Another study by Plant Engineering found that the chief cause of unscheduled downtime is aging equipment (34%), followed by mechanical failure (20%) and operator error (11%).
To gain the full benefits of predictive maintenance, install IoT (Internet of Things) sensors on your equipment to receive real-time alerts about asset conditions. This allows you to perform condition-based maintenance with less labor (technicians no longer have to inspect equipment regularly) and enriches the predictive maintenance dataset, leading to more accurate predictions.
3. Use a maintenance checklist
A maintenance checklist is a logbook technicians use to document equipment maintenance inspections. The checklist ensures maintenance is on schedule and done according to specification. It records maintenance inspections on an asset for quality and safety purposes.
A maintenance checklist should include:
- Asset location
- When it was last serviced
- Photos/videos of issues or concerns during maintenance
- Details of the specific maintenance request
- Location and specifications of associated parts and tools
These checklists can be used to create detailed, comprehensive work orders so technicians can access maintenance instructions, part locations, and an asset’s complete maintenance history. Work order management is a crucial part of maintenance operations because it prevents inefficiencies resulting from confusion, lack of information, and time wasted locating parts or searching for OEM manuals.
4. Track and manage inventory
Poor inventory management can prolong unscheduled downtime if necessary parts are out of stock during an emergency. Automate the process of ordering parts ahead of anticipated machine failure using a CMMS. This schedule is usually determined in tandem with an asset’s preventive maintenance schedule.
Just-in-time inventory management allows you to use historical data to anticipate when to order parts and avoid warehousing costs from having to overstock items or incurring a financial loss from unplanned downtime. Inventory often represents as much as 40% of total capital at industrial organizations and represents an area for improvement that must not be overlooked.
If you neglect inventory management, you risk production bottlenecks, resulting in irreparable reputation loss for companies operating in competitive industries.
5. Invest in training
Training your technicians reduces the chance of accidents and equipment failure while increasing the maintenance team’s speed and capacity. Periodically train your existing employees on how to use equipment and detect signs of malfunction. Re-evaluate your onboarding process for new hires regularly to ensure training remains up-to-date. Training is required for compliance with OSHA safety standards, so don’t neglect it.
Trained technicians are also more versatile, allowing them to respond to emergencies and fill in for other technicians in case of a staff shortage. Training also boosts employee morale because it leaves them feeling confident and capable and provides a sense of career progression.
Tip: During training, don’t focus exclusively on machine operation. An effective technician has a combination of experience, technical knowledge, and problem-solving skills. Teach technicians how to respond in emergency situations, delegate tasks, and take greater ownership of their role—especially if your facility uses Total Productive Maintenance (TPM).
6. Use high-quality parts from trustworthy suppliers
Having a close relationship with your suppliers enables you to accurately understand their capabilities and limitations. The goal is to source a reputable supplier who can produce a quality product and turn around large orders on short notice. Purchasing cheap parts or raw materials will only lead to defects, reworks, and scraps. When comparison-shopping suppliers, ask about fulfillment times, minimum order value, and comparative pricing.
7. Use a CMMS
A CMMS provides a comprehensive database for maintenance operations, allowing you to manage inventory, schedule work orders, track maintenance costs, and evaluate technician performance.
- Track service and maintenance costs
A CMMS records every asset’s complete maintenance history, including the labor and parts associated with each maintenance task. This way, you can make strategic cost-cutting decisions by tracking recurring service and maintenance costs. Say a particular group of assets is going through spare parts quicker than it should; you can investigate the root cause.
- Set up preventive maintenance plans to prolong asset lifecycle
Use your CMMS to automatically schedule and assign preventive maintenance work to available and qualified technicians so nothing falls through the cracks.
- Create, assign, and schedule work orders
A work order is an approved service request containing details about the nature of the problem, documentation/instructions on how to service the assets, and details on associated parts and tools.
- Evaluate employee performance
See each technician’s wrench-on time, their MTTR (and the MTTR of individual assets), and the number of work orders associated with each employee. You can also see how many work orders they send to your maintenance backlog.
- Reduce downtime
Keeping up a steady preventive maintenance regimen reduces the likelihood of equipment failure.
- Improve inventory control
You can set minimum and maximum quantity thresholds, generate email alerts for low inventory levels, generate purchase orders, track insights on parts usage and costs, and use barcode scanning to update inventory as new items are added or used.
8. Plan for emergencies
Being unprepared for emergency situations leads to prolonged downtime due to inventory being unavailable, technicians that are inadequately trained to handle emergencies, and a general lack of processes and procedures for emergency handling. All of these factors contribute to rising maintenance costs.
Come up with an emergency response plan for different contingencies. For example, what parts of the production line can continue to run safely if X asset breaks down? What are the procedures for shutting down equipment? If technicians are working on other tasks when the emergency occurs, what is the process for rerouting technicians to attend to the emergency? Which technicians have the right qualifications to respond to an emergency situation and which ones require additional training?
Marshaling people, processes, and tools ahead of time reduces the chances of being caught off guard in an emergency situation.