Linking PM To the Bottom Line

By Dan Hounsell  

Does your department perform comprehensive preventive maintenance (PM)? If you’re like most maintenance and engineering managers, the honest answer is, sort of.

The reasons for not performing PM or for doing so only sporadically are all too familiar. Developing a PM program tailored to an organization’s equipment and goals is time-consuming, and sticking with it through the organization’s ups and downs requires tremendous commitment.

But perhaps the most common reason for the half-hearted acceptance of PM in many institutional and commercial facilities is the challenge of convincing CEOs and CFOs that investing in PM will deliver consistent and tangible bottom-line benefits. Now managers have concrete evidence that investments in PM can contribute substantially to an organization’s financial health.

An analysis of PM performed on a range equipment for one large telecommunications firm compared a strategy that calls for no PM to a strategy that assumes the company spends the industry benchmark on PM.

The company partnered with Jones Lang LaSalle, the property management firm, to develop a system that would quantify the net present value (NPV) and return on investment (ROI) of investing in PM for the company’s portfolio. The firm surveyed 12 percent of the company’s portfolio and reviewed PM for a range of facility components and systems, from boilers, chillers and condensers to roofs, weatherproofing and parking lots.

The goal was straightforward: to determine whether performing no PM or investing in PM is more economically beneficial to the telecommunications firm.
The results “were overwhelmingly positive for performing preventive maintenance. The analysis shows that an investment in PM not only pays for itself but also produces a huge return on the investment.”

What kind of ROI? The analysis “indicated an NPV of $2 billion over a 25-year period for an $39 million per year ($0.33/ square foot) PM program. That represents an ROI of 545 percent.”

And 545 percent is a number that CEOs and CFOs could ignore only at their own risk.

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  posted on 1/1/2003   Article Use Policy

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