Effective maintenance management requires precise cost control. To operate effectively and convince management to invest, maintenance managers must be able to distinguish between the costs of breakdowns, which are charged to production, and the costs of preventive maintenance, which are treated as planned investments. The ability to correctly evaluate an account for these two areas is the foundation of rational management.
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Why do we evaluate breakdowns and PM maintenance?
Evaluating breakdown costs allows you to determine the actual losses resulting from sudden downtime. This makes it easier to assess how breakdowns affect production and the company’s margin. In turn, the valuation of PM costs helps in planning and controlling a stable maintenance budget, minimizing the risk of costly, unplanned repairs. Separating these two types of costs increases the financial transparency of the company and supports budget negotiations.
How do we calculate breakdown and PM costs? Differences in approach.
Breakdown costs are the sum of labor, materials and production downtime costs:
- The labor rate is increased (e.g. 1.5 to 2 times) due to the urgent nature of the intervention and overtime work.
- Materials are priced considering additional logistics costs (urgent delivery).
- We consider the value of lost production during downtime.
PM costs are planned and forecast expenses:
- Standard labor rate, planned for working days.
- Materials purchased as standard and delivered by planned logistics.
- No downtime costs — PM are carried out in a way that minimizes the impact on production.
Why does CMMS facilitate costing and billing?
CMMS systems provide invaluable support in accurately calculating and allocating breakdown and maintenance costs. They automate the recording and aggregation of data on technician working hours, parts costs and downtime, eliminating errors resulting from calculations made without the support of specialized tools. CMMS enables quick and accurate allocation of expenses to the appropriate cost centers and provides access to breakdown history and analytical reports, allowing you to identify critical assets and plan preventive actions. Real-time notifications and standardized reporting reduce response times and the risk of errors, while automated spare parts management minimizes downtime caused by shortages.
Example of breakdown settlement
A breakdown occurred on the packaging line and was repaired after working hours. The repair work took 3 hours.
Repair costs:
- Technician’s rate outside working hours: PLN 108/hour (emergency rate, i.e. 1.8 × base rate of PLN 60/hour)
- Total labor cost: 3 hours × PLN 108 = PLN 324
| Settlement stage | Calculation | Cost (PLN) |
| Labour | 3h x 108 PLN/h | 324 |
| Parts + urgent transport | 450 + 50 PLN | 500 |
| Cost of lost production | 3h x 2500 PLN/h | 7500 |
| Total: | 8324 PLN | |
In CMMS, the amount of PLN 8,324 is assigned to the Production Cost Centre — this is important information for the management board, showing the real losses, not just the cost of the UR itself.
Conclusions from the failure example
Accurate calculation of failure costs allows the maintenance manager to demonstrate the true scale of losses generated by unplanned events. This is a key argument in the discussion of the effectiveness of preventive measures and the need to invest in infrastructure or new technologies.
Example of PM maintenance settlement
An annual budget of PLN 84,000 has been set for preventive maintenance (PM) for the encapsulation line. This means a fixed monthly cost of PLN 7,000.
The CMMS system automatically creates PM orders and assigns the expenses incurred to them. Everything is settled within the previously approved budget, so there is no need to additionally burden the maintenance budget during the execution of works.
Conclusions from the PM example
Stable PM budgeting eliminates sudden and unforeseen expenses, which translates into better financial planning and more effective management of maintenance funds. Transparency in accounting has a positive impact on relations with the finance department and the Management Board.
Data for strategic decisions
The CMMS system provides clear indicators and information that help you make the right decisions:
- Failure cost analysis for individual devices – shows which machines generate the greatest losses. This makes it easier to justify their modernization or replacement.
- Failure/PM ratio – allows you to assess whether the funds allocated to preventive maintenance are sufficient compared to the costs of failures. This facilitates better budget planning.
- Breakdown cost reports for production departments (CK) – provide transparency by showing where costs arise. This helps to build responsibility and motivation to reduce breakdowns.
Accurate costing and accounting for both breakdowns and preventive maintenance (PM) activities is key to effective maintenance management. CMMS automates these processes, providing accurate data and complete transparency. This enables the company to better control costs, stabilize the budget and increase the value that the maintenance department brings to the organization.
