How to track and manage your maintenance and repair costs:
High maintenance and repair costs for physical assets can be detrimental to business success as it increases operating costs and reduces your profit margin. However, you cannot trade without the right equipment.
The only solution is to figure out how to estimate maintenance costs.
To do this, you need deep insight into your maintenance activities. You need to know which actions and assets incur the most costs and why? How can maintenance cost be tracked at the level of the entire organization as well as at the level of a single asset?
Understanding maintenance and repair costs
Maintenance cost represents all the costs that result from your efforts to keep physical assets in good working condition. Whether the asset is a car, a rental property, or a generator, if it requires regular maintenance and repairs, it will incur maintenance costs.
Manufacturing, aviation, and construction, among many other heavy industries, have a very strong incentive to control their maintenance budgets. Tracking maintenance costs is one of the methods they use to evaluate the effectiveness of their respective maintenance departments. In this sense, maintenance cost is often considered as a maintenance KPI (key performance indicator).
The right way to think about maintenance costs
Many business owners have the wrong mindset when it comes to maintenance. They only think of it as a cost center (operations that don’t add directly to profit). This puts maintenance managers and supervisors under constant pressure to reduce overall maintenance costs, even if it is not in the best interests of their organization.
The right way to think about maintenance is like investing. By doing maintenance, you are not losing money, but investing in your equipment. You pay to increase the performance and useful life of your assets and reduce the number of production delays in the months and years to come.
Maintenance and repairs professionals should always work within their budget. To have any chance of successfully managing maintenance costs, they need to know what factors contribute to their maintenance costs.
What items are included in the calculation of the total cost of maintenance?
The true cost of an asset is not just its purchase price. When an organization is buying a new part, it must also consider the cost of maintenance and repairs. The average cost of ongoing maintenance can vary according to the following factors
These types of budgeting decisions are often the responsibility of managers and maintenance managers, as long as they do not exceed the maintenance and repair budget. At the end of the year, business owners are often only interested in looking at total costs, which are shown as total MRO (maintenance, repair, operations) costs on the balance sheet.
MRO cost can be divided into labor costs, spare parts and materials, energy costs. Effective cost tracking for each of these items is key to reducing future maintenance costs.