In our fragile pandemic economy, every organization is struggling to do more with less by cutting costs, and a natural impulse is to make these cuts in non-revenue areas such as maintenance, safety, training, and human resources.
That’s the wrong impulse.
The Financial Impact
Cuts in these areas are shortsighted. Not only do they endanger the welfare of employees, customers, and the public, reducing spending on these crucial business functions exposes enterprises to multiple risks that can cripple revenue-generating operations.
In the case of maintenance, from a purely financial point of view, budget slashing can lead to disastrous workplace interruptions
Unexpected equipment breakdowns, frequent repairs, and too-rapid obsolescence are backbreakers to the bottom line. Before you make any hasty decision and cut the maintenance budget, have you considered the long-term consequences of insufficient maintenance. In a very real sense, when you cut maintenance, you’re borrowing against the future--a situation to be avoided if at all possible, even in the harshest of circumstances, such as the coronavirus.
The Full Impact
Of course, keeping people safe trumps immediate financial concerns. But safety and financial performance mix together in the reality of business. Neither concern is separate from the other.
Unreliable equipment often has a greater cost than just monetary—it can affect workers, customer relationships, brand reputation, and more. The total cost of unreliability consists of several elements:
- Unreliable equipment can lead to downtime, causing production to stop, often without warning. Once the sudden breakdown happens, the costs of a repair can increase four to fifteen times that of regular maintenance costs. The reason is simple: for every minute of delayed production, businesses are losing money.
- Excess maintenance
- If the company's equipment isn't in good working order, it will inevitably require more maintenance than if it had been properly maintained in the first place. These costs can quickly add up, resulting in lost profits.
- Equipment repair
- Repairing equipment means key staff is forced to stop what they're doing to address the crisis. Every unplanned incident leads to unpredictable costs and downtime.
- Equipment replacement
- With unreliable equipment, the costs of replacement far exceed the costs of routine maintenance. In financially troubling times, such costs can strain an already thin budget, cutting in to any profit.
- Downgrade in quality
- Due to unreliable equipment, poor-quality products and service can quickly erode customer trust in the brand, not to mention the added risks of penalties and costly recalls.
- Safety risk
- Unreliable equipment can place customers and staff in danger. Failing to inspect such equipment puts everyone at risk.
- Going out of business
- Overtime, poor quality, missed deadlines, and overall unreliability can eventually lead to enough costs that the business can no longer operate.
Routine maintenance is non-negotiable. The primary goal of maintenance should be to maximize the equipment's performance, without unplanned and unwanted costly failures. The well-being of equipment has a significant impact on the overall efficiency of the organization.
Diminishing the maintenance budget without a clear understanding of strategies that need to be changed to achieve the targeted reduction is a high-risk option. At best, maintenance costs may not increase. At worst, they will, both in the short- and long-term.