calculating costs and ROI of a CMMS

Justifying the Cost of a CMMS Solution

24/7 Software
Feb 15, 2022 7:00:00 AM

As a maintenance manager dealing with issues every day, you see the need for a Computerized Maintenance Management System (CMMS) daily.

Maintenance software will help your team become more organized, decrease asset downtime, and increase productivity while lowering maintenance costs!

Even if you're sure that a CMMS will be beneficial, there is still one big challenge to overcome: convincing upper management to pay for it.

This may be intimidating, but it's also understandable.

It is important to understand upper management's point of view before approaching them about purchasing a CMMS.

Understanding things from their point of view helps you create a thoughtful argument on the justification for purchasing a CMMS.

Maintenance: A Necessary Evil?

In many companies, upper management views maintenance operations negatively.

They do not see the department as an investment but rather a cost that they must minimize.

This view is reinforced by the fact that cutting or delaying maintenance expenditures does not directly affect the company.

Maintaining assets, however, is important.

The maintenance staff realizes that there are likely to be more significant costs by delaying or avoiding maintenance work in the future.

Also, not investing in technology like a good CMMS will prevent the company from achieving long-term efficiencies and cost savings measures.

Most times, the goals of upper management and the maintenance department differ.

While upper management is concerned with cost-saving, as highlighted above, maintenance is tasked with safeguarding the company's operations.

As you can see, upper management and maintenance staff have different goals.

The cost savings listed are obvious to upper management, but you know there is more going on than what meets the eye.

It can be difficult to get funding for maintenance.

In your role as the person requesting funding for maintenance, you are responsible for helping the company to see maintenance as a value creator.

This may be an uphill battle, but your job will become much easier if you can make it happen.

Appealing to Upper Management

In order to justify the costs of CMMS software, your proposal must align with the organization's goals.

Upper management will view such a proposal from a financial perspective.

Therefore, you will want to show that an investment in CMMS software will have a positive and measurable impact on the profit of your organization.

To achieve this, you can either increase revenues with improved production uptime or minimize costs with reduced maintenance inventory and labor costs.

Making a Case for CMMS

Know Your Work Order Costs

All CMMS solutions have a work order feature that allows facility managers to track costs and charges associated with each work order.

Costs can be categorized into estimated or actual costs.

The different costs that can be defined include labor (employee and contractor work cost), materials (stocked or non-stocked parts), and other costs like truck rentals and meals.

Quantify the Benefits

In order to present the CMMS as a worthwhile purchase, a proposal will need to quantify the benefits of implementing the software.

To begin, you must first make estimations about your maintenance operations.

Then you must identify how the CMMS will help you with your current operations and make improvements. For example:

  • How long would I typically take to find equipment documentation?
  • Knowing when assets are due for maintenance?
  • The amount of time spent locating parts for equipment in the stockroom?
  • If employees are working overtime, how long do they work for?
  • How much is being lost when assets break down due to lack of production?

Identify Areas of Cost Savings

After answering these questions and determining how the software might help improve the numbers, you'll conclude that the software is worth the cost.

Most CMMS software vendors provide you with information about their features to help you determine if they are a good fit for your business.

For example, a CMMS can store documents electronically for easy and fast access to locate manuals and guides.

Automated notifications alert the maintenance team about scheduled preventive maintenance.

Maintenance Reports help managers to monitor asset health, as they can see when an item needs attention and what work has been done.

Create a list of the areas of cost savings with estimates of savings for each.

Look to the Future

When justifying the costs of a CMMS, the discussion shouldn't just focus on the present.

Upper management will want to know how the CMMS will impact other business areas, so consider how it affects the maintenance team and other departments.

Perhaps the newly available funds will be used to hire new employees or get other equipment.

The management may also decide to use the money for research and development, buy new equipment, update facilities, or schedule much-needed training.

Estimating the Return on Investment (ROI)

The most important part of all this, to upper management, is the return on investment (ROI) and payback period.

If you can provide a clear estimate of CMMS ROI and a short payback period, this would be most effective in gaining approval for the CMMS.

Today, the growth of SaaS subscriptions has resulted in a low cost for the software.

As a result, the payback period can be short as a few months.

Justifying the purchase of a CMMS has its challenges but will ultimately be worthwhile.

In this article, we've tried to provide some helpful advice on making your case for purchasing a CMMS; some industry sources claim that having a CMMS can save your organization up to 10-15% on maintenance costs annually.

Although the advice in this article isn't a guarantee that you'll be given funds for a new CMSS, it should give you a place to start when asking for the funds.

Calculating the Return on Investment (ROI)

Calculating the ROI of a CMMS system is a useful way to determine whether or not a company should invest in such a system. The following equation gives the estimated value of the CMMS:

ROI = [(CMMS value – CMMS cost) / CMMS cost]

Over to You

A CMMS offers many benefits that can improve your workflows and efficiency.

These metrics will help you determine the potential value a CMMS can bring to your company.

Justifying an investment in 24/7 Software is easy.

The company offers a feature-rich, easy-to-use solution that helps your organization increase profits by lowering maintenance costs.

When it comes to CMMS implementation services, 24/7 Software offers the best in the industry.

To ensure a successful implementation of any CMMS software, you can Request a Demo to ensure you get started on the right foot.

Download our free eBook about facility maintenance software

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