The Real Cost of Reactive Maintenance

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In a perfect world, all your assets just work, without fail, until you decide to replace them at some distant point in the future. In the real world, assets fail prematurely, which results in reactive maintenance work for facilities managers.

What is reactive maintenance?

Reactive maintenance is simply – work that needs to be done to restore an asset back to operation due to reasons beyond our control. For facilities managers, this kind of maintenance often consumes the majority of available resources. This reactive approach can cause disruption to service, and can have a significant impact on budgets.

Many FM Teams work on the “run to fail” principle, and are internally resourced purely for this. Preventative maintenance work on the other hand, is usually outsourced for key services.

By effectively leveraging your facilities management system, you can gain full visibility over the ratio of reactive to preventative maintenance. Armed with this knowledge, you’re able to establish a performance measure for your outsourcing strategy.

Why reactive maintenance?

Reactive maintenance is a necessary inclusion in any facilities management strategy to enable business continuity. For certain assets, it’s the most cost effective way to maintain them. The underlying rationale behind reactive maintenance is allowing an asset to run to failure. In theory, minimising resource requirements, until the point of failure.

For certain assets, this is an effective strategy. For example, endlessly replacing light bulbs before they have expired creates unnecessary work and waste.

Lightbulbs, however, are low-cost and straightforward to replace, and are generally not essential to business continuity. Therefore, it is practical to adopt a run to failure reactive maintenance strategy for lightbulbs.

The service the asset delivers is an important consideration for this strategy. For example, air conditioning in a general office environment can have a lower impact than one that services a hospital’s operating theatre. Across the entire business, an asset’s maintenance strategy should be aligned to its service delivery criticality.

When NOT to rely on reactive maintenance

In some cases, reactive maintenance can be a costly and inefficient maintenance strategy. When deciding on your maintenance strategy, there are a few questions to ask:

  1. Is this asset key to business continuity?
  2. Does the breakdown or malfunction of this asset affect other key assets?
  3. Is this asset expensive or difficult to fix/replace?
  4. Does repair of this asset require external, specialist staff/tools?
  5. Is health and safety affected if the asset fails?

Clear-cut costs of reactive maintenance

Asset replacement

When it comes to reactive maintenance, the most obvious cost is the market price for asset repair or replacement. If your strategy is run-to-failure for that asset, you can somewhat predict these costs based on previous purchases.

Other costs associated with replacing assets include call-out service fees, hourly rates of relevant tradespeople, contractors or building remedial works.

Financial loss

When a key asset fails, the business endures downtime, where the primary business function is unable to be executed. If a key asset failure stops that primary business function, the business is unable to generate revenue until it is restored to working order.

As we know, revenue doesn’t occur in isolation, and is magnified by the fixed costs of the business. If a key asset breaks down, and revenue stops, the business is still liable for expenses like rent, wages and utilities.

What this means, is that while the asset is out of action, the business is actively losing money, not just sacrificing income.

The inconspicuous costs of reactive maintenance

Like an iceberg, many of the costs associated with reactive maintenance lurk just below the surface.

Employee aggravation

Depending on what the asset is, and its perceived importance, a reactive maintenance strategy can cause mental anguish for users of a facility. For example, if a garage door breaks down, it can cause acute anguish to employees who will arrive at work, only to be unable to park. They might then have to search for a nearby parking area, pay for parking, or return home if parking isn’t an option. Resulting in frustrated employees and potential lost productivity.

Now imagine that same door breaks down frequently, with an indeterminate amount of time required to fix it each time. Being uninformed of the interruption in advance means employees are unable to plan around it, resulting in sustained frustration over the situation. There will also be downstream cost implications to other groups within the business, even if not directly affected.

Long term, this frustration can lead to significant loss of productivity, and can potentially contribute to employee turnover.

Reputational damage

When an asset is key to service or product delivery, relying on reactive maintenance can potentially cause reputational damage. With the ease of leaving online reviews, it takes just a few disgruntled customers to affect brand perception.

Consider a business whose primary product is screen printed apparel. If the printing press is to break down, as per a reactive maintenance strategy, customer orders will be delayed. Even if you’re able to quickly determine the magnitude of the delay, there will be flow on effects for those customers.

Perhaps they’d ordered a batch of shirts to use for a specific trade show, and the delay means they won’t receive them in time. This has the potential to cause significant issues for their business; issues they’ll be quick to voice publicly online.

Consider now that a hospital has to cancel elective surgery for 2 days due to an asset failure in the air conditioning. “This happens all the time” is the customer response. Not great, given it is both affecting income and customer experience, especially if this is not a once off.

These kinds of reviews can cause potential customers to lose faith in your business, causing long term revenue loss through poor customer experiences.

Limiting asset lifecycles

If an asset breaks down or requires repairs frequently, it can affect the overall longevity of that asset. While reactive maintenance is about running an asset to failure, the resolution for asset failure isn’t always 1:1 replacement.

For example, you wouldn’t replace a HVAC unit the moment it breaks, you’d try to repair before replacing. Constantly repairing an asset can reduce its overall lifespan, when broken parts affect the performance of working ones.

Reducing reactive maintenance costs

Reactive maintenance is a necessary part of any asset maintenance strategy, particularly for low-cost assets. However, there are steps you can take to reduce your reliance on reactive maintenance when it comes to key assets.

The solution to reducing reactive maintenance costs, is twofold.

Firstly, it’s important to gain transparency in maintenance expenditure. A clear view of costs in maintaining the asset, and frequency of repairs, facilitates more informed decisions. If an asset is constantly breaking down, and is costly or difficult to repair, knowing this helps you make a decision to replace it quickly.

Secondly, reliance on reactive maintenance can be reduced by shifting, where appropriate, to a preventative maintenance strategy. Schedule in regular maintenance work on key assets, for times where disruptions will be minimised, to keep those assets in top shape. This allows you to reduce reactive maintenance costs, while extending the lifespan of your assets.

How to reduce reactive maintenance costs

The million-dollar question, is how to obtain that clear view, and start moving towards a more preventative maintenance model.

You can never have that “clear view” of what and where to target without good data and reporting. At FMI Works, our FM solutions offer you that visibility into your asset’s performance and its maintenance costs. This is the starting point from which you can choose the right maintenance strategy, and make preventative maintenance   possible.