The Case for Preventive Maintenance – A 545% ROI
While most would agree that proper preventive maintenance will help extend the life of equipment and reduce downtime, what isn’t always so clear to many companies is how the cost of preventive maintenance will benefit a company’s bottom line. What is the ROI of preventive maintenance and how can it be measured? Jones Lang LaSalle partnered with a large telecommunications firm to answer these questions, and the results from the study were shocking. Preventive maintenance resulted in an astounding 545% return on investment. The following article explains how this study was conducted and the details of its findings.
Establishing a BaselineThe research team first needed to establish a baseline of how much is spent on preventive maintenance. They found that the BOMA Experience Exchange Report shows repair and maintenance account for about 15 percent of total expenses. The report does not distinguish between repairs and maintenance costs. However, data suggest that preventive maintenance accounts for about 30 to 50 percent of the total repair and maintenance costs, or between 4.5 to 7.5 percent of the annual operating costs. This may not seem like an overwhelming number at first glance, but the cost can really add up over time.
The Financial ModelTo accurately determine the value of preventive maintenance, the team needed to identify the following:
- The actual cost of preventive maintenance
- The cost of any repairs or corrective maintenance necessary
- The cost of replacing equipment
- The expected life of the equipment
- How PM affects expected life
- How often required repairs need to take place if the equipment isn’t maintained
- How PM affects energy consumption
- The type of equipment in each building
- The quantity of each piece of equipment
- The age of the equipment
- The annual expense of preventive maintenance for this equipment