Calculating the Savings from Implementation of CMMS

With the advance in the market place of CMMS systems various questions are arising more and more frequently. For example:

What is the goal of our CMMS implementation?
How will it assist us?
What are the real expectations of a CMMS implementation?

CMMS systems, as we have come to know them, come basically from two distinct families. These are ERP systems such as SAP, JDE and the PRONTO system and EAM systems such as Epac, MIMS and a plethora of other systems. When most maintenance practitioners refer to CMMS systems they are in reality talking about EAM systems.

ERP Systems

ERP is a methodology of its own. The general methodology of ERP, as a descendent from the MRPII development done over the past couple of decades, is based on production analysis and planning. With origins in the industries of discrete manufacturing and service-based industries these types of systems are still most suited to these industries. The characteristic requirement of industries such as these is the need for responsive production planning to suit a rapidly changing sales environment.

Within ERP systems the stores, or purchasing processes are normally driven by the requirement for raw materials that are required to fabricate the components in accordance with the production plan.

Maintenance management does not form a general part of the methodology. The process analyses the raw materials inputs, according to the operations plan, and calculates the machinery and other resource requirements in order to maintain maximum levels of productivity.

Having said that it is worthwhile mentioning that the range of ERP systems currently on the market have generally developed very good and competitive maintenance management modules. The more advanced of these are easily able to assist in the maintenance management process by tying maintenance requirements to the changing production plan. Thus making the best use of maintenance resources.

EAM Systems

EAM systems are the family of systems that had their origins in extremely capital-intensive industries. For example the dominant mining industry of Australia has given rise to the MIMS system, which is now seen as one of the premier systems of its type in the world. Another system in this genre is the Maximo system, which also holds a strong position in terms of market share within the worlds capital-intensive industry. A main requirement of capital intensive industry is that there machinery requirements is generally fixed.

In a mining environment, for example, the equipment is generally required to be available 100% of the time based on a pre-determined availability. That is to say that the calculation for the amount of truck required to complete the forecast or budgeted mining activity is based on the total available truck hours x their expected availability.

Another example is the utilities industries. With recent episodes such as the California energy crisis it can be seen that the utilities industries are generally required to operate at 100% capacity. With that being defined as all of the time that the equipment is not required for scheduled maintenance to ensure its productivity.

The maintenance and equipment parts requirements of the assets required to do the work generally dominate the materials requirements, or purchasing processes, of such industries. Thus requiring a system more focussed on the maintenance aspect of the organisation as dictated by the forecast usage.

During the latter part of the nineties the similarities and converging functionalities of these two "families" of enterprise management systems allowed them to exist in similar industries. However they still have fundamental differences in their data structures and bottom line deliverables. Some industries have even gone to the extent of integrating the two systems, although with varied levels of success.

The Goal

No matter which system that is used the desired effect on maintenance is the following:

To move to a planned environment and allow for further progression along the maintenance evolutionary path.

As is now widely accepted maintenance is an evolution more than a goal. Despite the advances in technology there are still a very large number of maintenance management departments that are extremely reactive in nature. This is identified by the proliferation of non-controlled stores systems, high level of reactionary or breakdown content and by reading indicators such as MTBF and MTTR.

(MTBF - Mean Time Between Failures)
(MTTR - Mean Time To Repair)

A maintenance workforce in a reactive state will have a very low MTBF of equipment and an equally low MTTR. This may be masked, if not measured and regularly reported, by the fact that machine availability may still be at a high level.

What the indicator is telling us is that we have a plant or piece of machinery that is unreliable and breaks down often. Also we have teams of workers that are very good at fixing these breakdowns. The heroic culture that is fostered in these sorts of situations can be the most difficult obstacle in the implementation of a CMMS and realising the possible gains of this.

So the bottom line achievement that we want to realise by implementing CMMS is the advancement of the Maintenance Management workforce to the next level in the maintenance process or the Planned stage. This is indicated generally by the fact that we have greater control over our stores systems, we are able to utilise capacity scheduling techniques to better manage our human resources and we have a planned backlog of at least two weeks out. Giving us much improved maintenance preparedness. Reliability and maintainability indicators should look better also with MTBF rising and the MTTR measure, if we manage it correctly, staying at the pre-implementation low level.

This also gives us the strong base for our move onwards through the predictive stage of maintenance management through to the World Class/continuous improvement stage. Although worthy of additional comment these wont be addressed within this article.

So what is the pay back that we should expect? This is very difficult to calculate and requires the company undertaking the exercise to be able to take a very objective look at itself and evaluate the data collected in its current working state. This stage of any evaluation is critical to the accurate calculation of savings and therefore ROI.

Maintenance Human Resources and Material Requirements

So one of the base expectations, now openly stated, is the move from reactive to planned workflow status. A measure that can be applied easily is that a Planned / Scheduled task will be 50% more efficient, in terms of duration and costs, than an Unplanned / Unscheduled task. Although this appears to be a large number it is quite conservative and in some cases the efficiency savings can be many times this.

As such the following calculation can be applied with confidence:

(Past years Unplanned/Unscheduled work (in Dollar terms) - Unplannable tasks) x 50%

(An Unplannable task can be defined as a task that will not benefit from the efforts of planning. These are usually short duration tasks)

Divided, pro rata, into the labour and materials categories this calculation will give you a very powerful and achievable savings indicator from a thorough implementation of a good quality CMMS system.

However the amount of savings actually realised will of course depend on the ability of the organisation to truly embrace the changes that can be achieved and to drive them through all levels of the company. It is not uncommon to see the full possible gains not realised in the first years of the implementation as the maintenance resources may, wisely, be deployed on reliability projects in order to usher in the next phase of maintenance development in a more controlled and permanent manner.

An overall reduction in maintenance expenditure of 5% is an easily achievable result that I have witnessed several times.

Machine Availability

A thorough CMMS system implementation will also take into account the KPI structure of the organisation. With the amount of day-to-day data that will now be available pinpointing problem areas and modifying processes, routines and / or other factors will be more easily achievable also. As such a reduction in the amount of Breakdown work, or increase in overall availability of plant and equipment of 5% is also a very realistic and achievable goal.

As such a calculation such as:

Past years breakdown downtime (In dollar terms) x 5%

Can be used as a realistic measure to calculate the savings from this area of maintenance improvement.

Stores Holdings

As the work content becomes more and more planned in nature the work of the, generally long suffering, stores department will become more and more predictive in nature. Requiring fewer requirements to keep large volumes of parts and materials on a "we might need it" basis.

If the stores holdings can be reduced the logistical requirements to manage the stores function also decreases dramatically. Particularly that of the purchasing department and actual stores management personnel.

A percentage of approximately 8% reduction in stores holdings can be seen as both realistic and achievable. Following up on implementations with full stores reviews is recommended as this will bring the focus more and more onto the analysis of what are critical items and at what level do we really need to hold them given our new operating environment.

Other Areas

As well as stores criticality reviews it is suggested that there are a range of follow up exercises to a CMMS implementation. These include maintenance strategy analysis and reviews and root cause analysis reviews using our new reserves of accurate data. The focus created by the implementation will raise the awareness within the organisation of the strategic importance of maintenance improvement, and if managed correctly will lead to great initiatives that were previously obscured by the needs of the company to "just keep it going"

The possible flow on cost savings of these advancements, once the planned state is achieved is measurable only against the organisations desire to continuously improve itself.

In concluding there are many financial gains that can be realised and should be expected from a CMMS system implementation. However they are all integrated, and will only be realised if there is a very genuine effort to adopt the concepts of maintenance improvement that are so very well supported by these modern systems. The figures and expectations quoted here are average values; much will depend on where the organisation is truly at now. Some organisations may well be able to realise many, many times that which has been mentioned.

ROI is another story entirely, as part of the selection process the possible savings should be used as a guide to how much the organisation is willing to spend on a system. As such the ROI, over years, can then be accurately predicted and often surpassed if calculated conservatively.

No consideration has been given in the scope of this article to the overall benefits, in productivity terms, of an ERP implementation.