The task of creating maintenance budgets is both exciting and challenging. On one hand, there’s the excitement of forging a path for the year ahead and thinking of all the great things the team will accomplish. On the other hand, there’s the terror of wondering if you’ve missed something critical, or that emergencies will arise that the budget just doesn’t cover.
Creating maintenance budgets is especially difficult when the budget is not made intelligently or with the proper background information.
Anyone working in an asset-intensive organization will know that maintenance budgets commonly suffer from these issues. Asset details and cost history are often lacking or unavailable, making it almost impossible for an accurate maintenance budget to be created and followed.
Guesswork when creating maintenance budgets usually means the budget will not be as useful a guide for the department as it could be. It’s an inverse relationship: the more guesswork you rely on, the less useful the budget will be. It also undermines maintenance’s credibility with other departments, especially finance and operations.
Conversely, reducing the amount of guesswork you need to use when creating your budgets will make your budgets more accurate and raise credibility with other departments.
Creating maintenance budgets offers you two challenges and four key opportunities. We can’t promise that simply keeping these in mind when creating your budget will make it completely accurate, but it will definitely be more accurate than it would be if you had ignored them.
There are two major challenges that arise when trying to create a maintenance budget. The first is simply a lack of accurate data. The second can be viewed as a language barrier between departments.
An accurate maintenance budget cannot be made without data. When maintenance teams are missing key information relating to asset history and reliability, they are forced to guess their future requirements.
When the unexpected occurs, maintenance teams will tackle the breakdown at whatever cost to get the equipment back online and production up and running. This results in necessary changes to the budget in the best-case scenario. The worst case scenario requires the team to go over budget.
Decisions may be rushed and unsupported when there is insufficient or inaccessible data. A lack of data also often constrains the ability to collaborate or negotiate. Most important, not having the right information makes it hard to identify and correct the root cause of the issues. This creates tremendous challenges for creating maintenance budgets.
The needs and language of the maintenance team differ significantly from that of the finance team. Where maintenance needs operational and asset-centric data, the finance team needs account-orientated, general ledger-centric information.
On the maintenance side, asset details that support objective budgeting include:
This information is critical for maintenance teams to create an accurate budget, but none of it is necessary or important to finance teams who require forecasted costs summarized into the corporate chart of accounts.
This means maintenance teams are tasked with creating a budget in terms and with details they need and understand and then translating it to meet the requirements of the finance team.
When maintenance budgets are not developed at the maintainable asset level, the forecast figures required by the finance team will be purely conjectural and high-level. Similarly, when budget adjustments are requested, there is little to no rational basis on which to make decisions.
While these are the two primary challenges in creating a maintenance budget, there are other challenges that may arise.
The opportunities surrounding maintenance budgets lie in getting better asset and cost data from which to extract meaningful information and making decisions that improve the stability, predictability, and consistency of the equipment.
In asset-intensive industries, maintenance is often seen as a major cost center. Identifying waste, inefficiencies and the cause of unreliability, and finding ways to prevent or control those cost items over time, makes it possible to improve overall execution and gain a competitive advantage.
It becomes easier to accurately plan maintenance costs when maintenance budgets are built intelligently, with historical equipment data. It also helps to avoid the need to go over budget when breakdowns do occur.
Maintenance budgeting is a foundational element driving equipment reliability. When managing costs in accordance with a budget, the variances will become evident as the work is executed. Better data and analytics allow organizations to determine where those issues are arising and why.
Poor asset performance can be analyzed to determine the root cause of the issue so that better decisions can be made the next time, and good asset performance can be leveraged. When there is visibility into repeat problems, solutions can be found that mitigate and avoid future failures or deliver repairs at a lower cost.
Maintenance budgets are dependent on knowledge and experience. Real-time access to historical asset and cost information simplifies the ability to make risk-based decisions.
Budgets formed through guesswork do not support risk-based decisions or reliability engineering. Good data is required in order to weigh the costs and benefits of each approach and how to prioritize the improvements.
Accuracy in creating maintenance budgets makes it easier for maintenance teams to justify budgets based on the latest maintenance plans and forecasts. When push-back on a budget item occurs, the ability to drill down to the details will encourage a collaborative, risk-based decision, so that there will be fewer surprises and less finger-pointing when a break down occurs.
Your maintenance budget is an important part of your maintenance plan. It should be created with the best data and information available to ensure controlled maintenance costs, drive reliability engineering, reflect knowledge and experience, and improve credibility and negotiation. Get started on the right foot with an intelligently built and easily understood maintenance budget.