CMMS budgeting and control functions help manage costs

You’ll find the level of sophistication of the budgeting and costing features integrated into many CMMS packages rivals any ERP or accounting package, says David Berger in this month's Asset Manager column.

By David Berger

A principal function of a CMMS package is to help you plan and control the maintenance work your department is doing. This includes tasks triggered by time, meter reading, condition, event or simply receiving a work request from someone on the plant floor. These triggers and requests for work are then turned into work orders. Labor and parts to complete the work are scheduled. Ultimately, the data about the nature of the problem, its root cause and the corrective action taken are recorded for posterity.

Another key function of a CMMS overlaid on work planning and control is the planning and control of costs. As is the case with work management functionality, features related to budgeting and cost control have been developed and improved during the past few decades. You’ll find the level of sophistication of the budgeting and costing features integrated into many CMMS packages rivals any ERP or accounting package. These features are discussed in this and next month’s columns.

Work order management


In the pre-computer age, maintenance management centered on equipment. You’d see a clipboard hung near each piece of equipment, and a technician completing any preventive or corrective work would note the details on the clipboard. This produced a chronological log of who did what work on the equipment, and could even include a list of parts used and labor hours consumed.

After computerization, work orders became the focal point for data collection and, in turn, those work orders are charged against equipment or cost centers such as a production line or operational department. This approach built on the manual system in that not only could the CMMS log work completed, but it could provide a detailed accounting of how maintenance dollars are being spent. Now, it’s possible to summarize labor and material costs for a given time period or break them out by individual work orders charged against any component, equipment or cost center.

Additionally, even the simplest CMMS packages allow you to add estimates of labor hours and material cost to work orders during the planning and scheduling phase. After the technicians record actual hours taken and materials used, the software can produce a variance report showing actual-versus-estimated costs for a given work order. This is a useful feature that helps planners and supervisors build a meaningful work schedule and ensure that materials are available in time to complete the work. At least that’s the theory.

Many maintenance departments still don’t record estimated hours on the work order. One explanation offered is that it’s too difficult and there are too many variables to determine estimates for unplanned work without investigating the problem first. Even planned work can be unpredictable, except, perhaps, simple PM routines. Another stated reason for the resistance to pre-work estimating is that it frustrates the technicians if the allowances are too tight, or encourages them to slack off if estimates are too loose. Even if an estimate is spot-on, some maintenance managers just don’t accept that the actual recorded time could possibly be exactly equal to the estimate, and will therefore challenge or be suspicious of any technician who consistently logs it as such.

Maintenance budgeting


Most of the early CMMS packages focused on work order management and, therefore, didn’t offer much more than a simplistic spreadsheet-like maintenance budget for users to track high-level actual-versus-budgeted costs on a monthly basis.

Modern CMMS packages typically have a wider range of functionality that includes, for example, budgeting down to any level of the general ledger account coding structure. This gives users the flexibility they need to prepare monthly budgets at a detailed or summary level for a given department or cost center, equipment, component or even activity, and track actual costs against budget any time they want.

Not only can many CMMS packages report budgets on a monthly basis, but they also can report on a year-to-date or rolling 12-month basis, and even multiple-year comparisons. Users also can generate ad hoc reports for any user-defined time period with appropriate filters, sorting and desired level of detail. For companies that prefer to prepare and track budgets on another application such as the corporate ERP system or an Excel spreadsheet, many best-of-breed CMMS packages have developed the required data bridges and experience to ensure proper applications integration.

Combining work order management and budgeting

For about 20 years, I’ve been conducting detailed reviews of some of the more popular CMMS packages available in North America. One weakness with CMMS packages even today is the inability to easily integrate work order management and budgeting. It astounds me how slow the progress has been.

One of the long-standing questions in the review asks: “Is the budgeting module directly integrated with the planned hours and planned material usage on the work orders?”

It has only been within the past few years that many vendors have begun to offer this functionality in the form of standard reports, in part because of the insistence of customers such as government. In fact, you can see the most recent CMMS/EAM Software Review at www.plantservices.com/cmms_review. If you go to the Software Aspect called “Budgeting and Cost Reporting,” the second question in this section, you’ll see how the CMMS vendors have responded.

The importance of this feature is clear — maintenance management can better manage costs to budgets. For example, if a given cost center shows a variance between the budget and actual cost, you can move to the third column to see if the total of estimated hours on work orders for that cost center is equally out of line. Furthermore, with some packages, you can drill down to individual work orders to determine if the problem lies with estimating or with how the work was performed. Finally, imagine that you receive a work request that would drive costs over budget. Some CMMS packages can be configured to disallow a user from trying to issue a work order against that cost center without management approval.

Controlling budget overruns

The purpose of preparing budgets and tracking variances is to manage your costs better. Thus, CMMS vendors have devised a range of features that can help you catch problems early enough to take corrective action rather than simply reporting on variances after the fact. For example, most modern packages have notification and approval capability. For example, this allows users to for example, notify a given manager that a given work order needs approval or that it puts the budget at risk of an overrun.

Some packages have more comprehensive functionality such as alarming and workflow capability. This allows the CMMS to warn managers of a potential overrun. The alarm could be triggered by the rate of expenditure projected to the end of the budget period or when actual cost is within 10% of full budget.
Dashboards can be configured to display graphs, stoplights and dials that show whether critical budgets are under control. If a budget item trends towards the red, several of the more sophisticated packages allow users to drill down to summary and then progressively more detailed work order information to determine the source of the overrun.

E-mail Contributing Editor David Berger, P.Eng., partner, Western Management Consultants, at david@wmc.on.ca.

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