Calculating the ROI of Your Computerized Maintenance Management System (CMMS)
By: Paul Lachance

Is the software cost for CMMS worth it? Are you asked to justify the expense to purchase the software? These are age-old questions that never seem to go away.

Calculating return on investment (ROI) for any CMMS technology purchase requires several important pieces of information – not all of which are easy to get. Still, even with the roughest estimate, CMMS technology will usually show positive ROI – usually strong ROI.

Organizations look to CMMS for a variety of reasons. “Saving money within the maintenance department” is one of the most common. To justify the expense of CMMS from a cost standpoint, you can validate with some simple formulas.

Data Needed to Calculate ROI
Not all of this information is needed, but the more, the better. In many cases, your accounting/finance department can help you get this information.

Equipment Data
Typically, this would be dollars spent on equipment due to maintenance operations. This might include items such as refurbishments and replacement due to failure. These are expenses you might not have incurred if these issues could have been avoided. This is one of the main reasons for purchasing CMMS in the first place.

Inventory
When maintenance is performed on equipment, parts may be used. Sometimes this is routine (preventive), while other times it is unexpected (corrective). Keeping inventory without a system can be more expensive (not optimally ordering, poor leads times, stock goes stale, etc.). For this area, find out what the overall costs of your spare-parts/maintenance-related inventory are.

Overtime
In many cases, overtime by your maintenance team can be attributed to unforeseen/unexpected work orders. If you can reduce the amount of overtime due to more proactive preventive maintenance and overall reduce corrective maintenance, this can have a positive impact in maintenance costs, not to mention the morale of the team.

Downtime
Obviously there is a direct impact on your profits if you incur too much downtime. For your organization, measuring downtime may be easy, or it may be impossible. When you have unforeseen equipment failures and are unable to produce or operate at optimal levels, there is a cost. If it is possible to determine what the cost of that downtime is, this is very helpful in calculating ROI.

Other
In many cases, if you ask your accounting department, “What was our overall maintenance expense last year?” They just might be able to give you this number. This can be valuable in calculating ROI. You can use this number in place of all of the above.

With good CMMS, you can improve the operational efficiency of your equipment, reduce inventory costs, minimize overtime, reduce downtime, and overall have a smoother running maintenance team. The operational benefits are great, but, on top of all of this, when properly implemented, the CMMS software actually contributes greatly to improving your bottom line.

Paul Lachance is president of the Smartware Group, which manufactures Bigfoot maintenance software, www.bigfootcmms.com.