Why bother to measure Maintenance costs?


The obvious answer, of course, is because you have to. Maintenance is a cost of doing business and is required to be reported as such in your financial statements.

But there is more behind my question, and the answer is very dependent on the nature of the assets being maintained. First I’ll look at fixed manufacturing assets, then mobile equipment and lastly plant and institutional infrastructure.

In manufacturing plants it is very common for all maintenance costs to be charged to work orders, which are in turn charged to assets, usually at the equipment or “functional location” level. In some plants all costs, including labour, are charged to work orders, a process which requires extensive and costly administration. In most of the plants I visit, material and contractor costs are charged to work orders and plant labour is charged to an area maintenance labour account.

I’ll focus on the pros and cons of recording labour costs against work orders.

As with any other measurement, the purpose of measuring maintenance costs is to compare actual equipment maintenance costs to some target, and to take some action where the difference is significant. Most commonly, that action will be to rebuild, redesign or replace the equipment.

However, for fixed manufacturing equipment,  the cost of maintenance is seldom a reason for such action. Major rebuilds, redesign or replacement usually occur because the equipment:

– is unreliable

– has operating costs that are too high

– can no longer manufacture a product that can compete in the marketplace

– can no longer meet changing environmental standards or

– requires too much downtime for routine inspection and servicing

It is unusual for the cost of maintenance, in itself, to be a significant factor. If maintenance costs for a specific item of equipment are thought to be too high, it is extremely likely that the equipment is also unreliable, and the cost of the losses resulting from that unreliability are many times greater than the maintenance costs. For this reason, it is much more important to measure reliability (see Measuring Reliability) than it is to record the cost of maintenance.

Also, work order records of maintenance labour costs are notoriously unreliable for several reasons, including that the people who enter labour records in the maintenance computer system recognize that this information has minimal value and as a result sometimes make little effort to ensure accuracy.

Because detailed work order labour cost records are unlikely to have sufficient value to justify the recording cost, the practice of charging maintenance labour to area accounts is probably the most sensible approach.

It is quite different for most mobile equipment, where maintenance costs may be the most significant factor when making decisions to overhaul or replace units, although reliability may also be important.

For infrastructure in manufacturing plants and especially service institutions, maintenance costs are important, although the decisions that maintenance cost information may drive are more subjective and based on “management standards”. For example, the decision on whether to paint facilities every 5 years or every 10 years will normally be driven by a subjective assessment of appearance rather than a need to protect the structure.

Also, the budgeting process in many publicly-funded institutions requires that maintenance and redesign activities are charged to different accounts (see What is ‘Maintenance’?”), which significantly increases the administrative cost as well as the importance of accurately recording maintenance costs at the work order level.

For accurate maintenance cost recording there are options to charging any maintenance cost (materials, labour or contractors) to work orders. For more on this see “Why charge to work orders?“.


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© Veleda Services Ltd

Don Armstrong, P. Eng, President