Costs & KPIs · Advanced
Review Purchasing Costs
Learn to review recorded purchasing expenditure for a defined period, separating spare parts from external services and identifying the purchases that contribute most to the total.
Understanding and controlling purchasing costs is fundamental to effective maintenance budget management. By systematically reviewing expenditure, organizations can identify areas for optimization, negotiate better terms, and ensure resources are allocated efficiently. This process helps in maintaining asset reliability while minimizing operational costs.
Where it's available and step by step
Step by step in ManWinWin Desktop
- 1
Open the available purchasing records or associated cost information for the purchases you want to review.
- 2
Identify the date represented in those records and select the purchases within your start and end dates, using available filters where applicable.
- 3
Check what the amounts represent before combining them, keeping order values separate from recorded expenditure.
- 4
Narrow the selection to the required suppliers, materials or cost centers where that information is available, and note the scope used.
- 5
Separate spare-part purchases from external-service purchases using the line descriptions and associated records, checking unclear entries before including them.
- 6
Review the amounts for each group and the combined purchasing total, then identify the entries contributing most to expenditure within the selected scope.
Theory and technical background
Importance of Cost Control in Maintenance
Cost control is a critical aspect of maintenance management, directly impacting an organization's profitability and sustainability. ISO 55000 emphasizes the value realization from assets, where optimizing costs plays a significant role. Regularly reviewing purchasing costs allows maintenance departments to identify inefficiencies, prevent budget overruns, and make informed decisions regarding procurement strategies. This proactive approach supports strategic asset management by ensuring that every expenditure contributes positively to asset performance and business objectives.
Categorizing Maintenance Purchases
Effective cost analysis requires accurate categorization of purchases. Typically, maintenance purchases fall into spare parts (consumables, repairable components) and external services (contracted labor, specialized repairs, calibrations). EN 13306 defines various maintenance activities, each potentially involving distinct purchasing categories. Separating these allows for targeted analysis: for example, high spare parts expenditure might indicate frequent breakdowns or poor inventory management, while high service costs could point to a need for in-house skill development or better service level agreements. Precise categorization is key to identifying root causes of high costs.
Identifying Key Cost Drivers
Once purchases are categorized, the next step is to identify the main contributors to total expenditure. This involves analyzing purchase amounts by supplier, material type, or cost center. Key Performance Indicators (KPIs) like 'Maintenance Cost per Asset' or 'Maintenance Cost as a Percentage of Replacement Value' can be enriched by understanding which specific purchases drive these figures. Identifying high-cost items or services enables targeted action, such as negotiating bulk discounts for frequently purchased spare parts or evaluating alternative service providers, leading to significant cost reductions and improved budget efficiency.
Best practices
- Always verify recorded expenditure against actual invoices to ensure accuracy.
- Standardize descriptions for spare parts and services to facilitate clearer categorization.
- Utilize CMMS reporting features to automate periodic cost analysis and identify trends.
- Involve procurement teams early in cost reviews to leverage their expertise in negotiation.
Frequently asked questions
Why is it important to separate spare parts from external services?
Separating these categories provides granular insight into where maintenance funds are being spent. It helps differentiate between material costs and labor/expertise costs, allowing for more precise analysis of inventory management effectiveness versus reliance on third-party support. This distinction is vital for strategic cost reduction initiatives.
How often should purchasing costs be reviewed?
The frequency depends on organizational needs and budget cycles, but quarterly or semi-annually is a good practice. High-cost industries or those with fluctuating market prices may benefit from monthly reviews. Regular reviews help catch anomalies early and ensure continuous budget alignment with operational goals.
What if purchase records are unclear or incomplete?
Incomplete records can hinder accurate analysis. It's crucial to cross-reference with available documentation (e.g., invoices, work orders) and communicate with the purchasing department to clarify entries. Implementing stricter data entry protocols in the CMMS can prevent such issues, ensuring data integrity for future analyses.
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