Organizations have considerable money invested in real estate and facilities assets. Yet facilities management is viewed by many as a cost center or just a maintenance function. With shrinking budgets, facility managers are repeatedly asked to streamline operations and reduce the expense of facilities maintenance.
The difficulty in any general cost-cutting initiative is identifying and eliminating the non-productive excessive costs that can be cut. The tendency is to search for quick-hit, big-ticket cost reductions that won’t adversely affect operations. In most facilities departments, these big-ticket items don’t exist. And, when they do, they will typically only provide a one-time cost savings that doesn’t really reduce your ongoing budgets.
To truly reduce budget needs, facility managers need to implement true and sustainable cost reduction strategies. This type of cost reduction involves identifying where excessive costs are leaking and closing the leaks. These slow cost “leaks” are your hidden costs. On your budget lines, they look normal. However, with some analysis, you’ll often find cost reduction opportunities in them. By identifying and reducing these hidden costs, you can enable and achieve long-term budget reductions.
By digging deep into a few specific areas of the facilities operation, facility managers will be surprised to learn that a good portion of their shrinking budget dollars is being spent on various non-productive hidden costs. Below are examples of some common hidden costs found in most facilities operations:
- Purchasing and carrying cost of excessive spare parts inventory.
- Labor time spent following inefficient and redundant processes.
- Labor and materials cost of performing repairs on equipment under warranty.
- Labor and materials cost of performing preventive maintenance work too frequently.
- Equipment costs incurred because of inadequate equipment maintenance procedures – causing unnecessary breakdowns, costly repairs, or avoidable replacements.
- Excessive administrative costs gathering operating information and compiling management reports.
- Labor and materials cost of performing billable off-the-record work for customers, but not recapturing the costs.
Sustainable cost-reduction is not easy and it doesn’t happen overnight. For a facility manager to initiate and successfully implement cost-cutting measures, they must first understand their current operations. They must have access to operating information which typically comes in the form of reporting from their Computerized Maintenance Management Software (CMMS). Most CMMS software available on the market today has the inherent ability to provide the needed information. Most often, what’s missing is the availability of useful management reports.
With the right analytical information and reports from the CMMS, a facility manager will better understand their operations and can start identifying and initiating improvement efforts targeted at the various hidden costs.