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July 2007
Defining "Maintenance costs"
One universal measurement of maintenance performance, and perhaps the measure that matters most in the end, is the cost of maintenance. Unfortunately maintenance costs are often used to compare maintenance performance between companies or between plants within the same company. Equally unfortunately, there is no standard for measuring maintenance costs. Each company, usually each plant within a company and often each department within a plant develop their own definition of "maintenance costs".
For this reason, maintenance cost comparisons should always be accompanied by a clear definition of what is included and excluded for each plant included in the comparison.
If you are in the process of defining maintenance costs, or believe that your definition needs updating, the following table may be of help.
Type of cost (materials and labor) |
Recommended cost category |
Preventive maintenance |
Maintenance |
Corrective maintenance (repair or replacement of failed components) |
Maintenance (unless its a capital replacement) |
Lubrication (a specific PM task) |
Maintenance (In some plants this is a Production cost) |
Contracted preventive and corrective maintenance |
Maintenance |
"Maintenance" work done by Production employees. This can included cleaning, inspections, replacement of "production" components (e.g. filter media, etc) and perhaps some lubrication. |
Production - but remember to take these costs into account when making comparisons |
"Non-working" maintenance labor (e.g. maintenance safety meetings, waiting time, etc) |
Maintenance |
Maintenance supervision, planning and administration |
Maintenance |
Non-capital plant improvements. This includes both process and reliability improvements |
Probably maintenance, however its a good idea to include an "improvement" category in Work Order codes to allow improvement costs to be identified |
Capital improvements and replacements |
Capital (but remember that the definition of "capital" also varies widely) |
Disposal of obsolete and surplus stock and inventory adjustments (where inventory is working capital) |
A special expense account, separate from other costs and not in the maintenance budget |
There are other specific activities that may be performed by Maintenance people and these should be considered and defined, such as snow removal, reading utility meters, etc.
A clear definition is important so that cost trends can be identified, which is the "comparison" that is of the greatest value. The definition becomes critical if costs are used as part of an incentive, for example, where maintenance is contracted to an outside company.
Related Articles:
Visible and Invisible Maintenance Cost Savings
"Focus on Reliability" (part 1)
"Focus on Reliability" (part 2)
Reliability Improvements Drive Down Maintenance Costs
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