How Asset Management Automation Can Prevent Overspend
Asset and inventory tagging and management is kind of like going to the dentist for most operations people: It’s good for you to do but nobody really likes to do it. Things could be worse, though. You could be in charge of asset tagging and management at Wal-Mart’s scale, which involves 900,000 fixed and movable assets and equipment.
Now multiply the complexity of managing those assets across multiple locations – or, in Wal-Mart’s case, almost 5,000 locations just for retail store operations. It’s not hard to see that the teams in charge of asset tagging and management can often make mistakes, whether it’s losing track of planned refrigerator maintenance or paying for repairs to an HVAC unit while it’s still under warranty. This is especially true if the process is done manually.
While these mistakes may seem insignificant in the grand scheme of things (after all, the goal is to just keep everything up and running as best as possible, right?), human error can quickly overrun even the most carefully laid-out budget. This is where many FMs find themselves scratching their heads at year-end budgetary reviews: How did we overspend by that much when no major catastrophes took place? All of our work orders were completed on-time, so why are we looking at an uphill year-over-year spending pattern?
Like your grandmother always said, the devil is in the details. Companies whose facilities programs are still running on spreadsheets or pen-and-paper lack the ability to track assets in real-time. Scheduling work orders, selecting service providers, and reviewing invoices are all time-consuming, manual processes. Furthermore, many of these critical decisions around when to repair and how much to pay are based on an FM’s “gut instinct” rather than hard data – or, they’re influenced by a reactive, “let’s just get this done as quickly as possible” mentality in the case of emergency breakdowns.
Asset Management Automation software solves for these problems and many others by taking those “gut instinct” decisions and turning them into informed, data-driven actions that take into account historical data, real-time performance, and intelligent predictions. In this blog, we’ll explore a few of the most common culprits of FM overspend and exactly how Asset Management Automation (which, of course, is an investment in itself) can not only reverse a pattern of budgetary overrun, but transform it into positive ROI.
Top 4 Contributors to Facilities Management Overspend
The following four categories are some of the most common contributors to facilities management budgetary overrun – and they may not be obvious to even the most experienced FM teams. Find out how Asset Management Automation software can resolve these hidden cost centers and keep your facilities budget on track.
1. A Lack of Planned or Preventive Maintenance
According to a 2018 study by Plant Engineering, aging equipment is the leading cause of unscheduled downtime in facilities, and we all know how costly even just a few hours of downtime can be. All equipment and assets will degrade over time, but unscheduled facility downtime can be easily prevented by tracking equipment data and using historical metrics to forecast spending via a planned maintenance schedule.
Sure, it may be tempting to skip over routine maintenance from time to time in order to dedicate resources to something more pressing, but avoid doing so at all costs if you want to avoid unhappy (read: expensive) surprises later on. This is especially true when a neglected system eventually fails to a point that it must be replaced: The cost to replace an asset will far surpass the yearly maintenance spending that might have kept it up and running for several more years.
With a Service Automation or other Asset Management software solution in place, planned maintenance is both simplified and automated, lifting the burden of scheduling repair work and tracking asset performance by hand. With ServiceChannel’s Planned Maintenance Manager, for instance, FMs can set up recurring maintenance events and create yearlong schedules based on each asset’s required service frequency. Then, these maintenance events are automatically monitored in real-time with location-based calendars, reports, and GPS-enabled contractor check-in capabilities.
All in all, a well-executed planned maintenance schedule will greatly reduce costs due to lost productivity and unplanned asset replacements – both of which can add up dramatically at the year’s end. Automating your preventive maintenance strategy is the first step to a modernized, agile, and truly efficient facilities management program.
2. A Poorly Planned Budget
A budget that lacks detail or is poorly thought-out will lead to serious overspend later on. Yet far too many facilities managers fall short when it comes to laying out a budget that makes sense for their organization’s needs. Why? Because they believe FM budgeting is as simple as accepting a number from their CFO and allocating funds according to roughly the same percentage-based breakdown they’ve used for years. This approach, however, fails to take into consideration technological updates, new or aging assets, and changes to day-to-day facility operations.
When setting up your yearly maintenance budget, the first step should be ensuring complete visibility into both current and future assets. A Service Automation platform with Asset Management features allows FMs to visually tag each piece of equipment in their facility, creating a detailed record of current operating condition, age, and prior repair history.
Once an inventory of assets has been digitally compiled, expected costs for each can be bucketed into planned versus reactive categories using predictive models that draw on historical data. While it’s not possible to perfectly predict every issue, failure, or breakdown in the year ahead, using data-driven insights to inform budgets will help FMs leave some wiggle room for emergencies and keep spending within NTE limits.
Not only will Asset Management Software help FMs build a case for the budget they require to company leadership – it will also keep them accountable to the budget that does get approved by automatically keeping track of spending per category, per location.
3. Failure to Keep Track of Equipment Warranties
While it may seem obvious not to pay for repairs on a piece of equipment that’s still under warranty, studies found that most companies lose out on 34% of potential savings by doing just that. Many times, these mistakes happen as a result of an emergency. Imagine that a pipe bursts in your newly constructed luxury retail location, leaking water from the ceiling in multiple locations across the sales floor and back room. Your store manager may react in a panic, trying to halt the damage as quickly as possible by Googling the nearest available plumber.
Without an Asset Management solution in place, your store manager would have no way to look up the failed asset and determine its warranty status. In an emergency situation, he or she would be more concerned with handling the repair immediately than waiting to hear back from a district manager on the warranty, accepting the plumber’s invoice at just about any cost. In this example, the business could lose up to $40,000 repairing an asset that’s still under warranty, simply due to a lack of transparent, accessible warranty information.
An Asset Management Automation platform prevents costly warranty leakage by digitally storing information on all assets, including warranties, and ensuring that this information is carefully reviewed by the FM or store manager before a work order is even created. In the example above, the store manager would simply need to scan the QR or RFID code on the water pump to pull up the asset and warranty information, alert the district manager, and submit a high-priority work order for same-day repair – all without spending a dime.
4. Manual Invoicing.
Many of today’s facilities managers lose hours of their day sorting through and submitting paper invoices from contractors for approval, a process that is both costly and prone to human error. In fact, a 2018 study found that accounts payable can incur a cost ranging from $2.07 to over $10 per invoice in processing fees alone. While this cost might appear insignificant as a one-off, think about how many invoices your FM team processes per week, month, or year: Failing to go electronic can cost businesses thousands of dollars in the long run.
Switching to an Asset Management or Service Automation platform with an electronic invoicing tool not only reduces processing costs, it also increases visibility into spend ensures a greater degree of accuracy. With ServiceChannel’s Invoice Manager, for example, contractors submit their invoices electronically through the platform to be validated according to predetermined business guidelines (such as NTE limits) This prevents contractors from billing for larger sums than your budget allows.
Electronic invoicing platforms are also easily integrated with your company’s existing financial system, further improving visibility. With this functionality, corporate managers can easily review, approve, and pay pending invoices. Then, service providers can quickly check up on their payment status using the app.
Transparency, accountability, and accuracy are your keys to preventing asset management overspend. Smart facilities managers know that keeping track of maintenance schedules, reviewing invoices, and setting up budgets is difficult – if not impossible – to handle on pen and paper alone. Instead, take advantage of today’s technology to track assets in real-time: FMs can access up-to-date information on warranties, past servicing, and even equipment performance with an Asset Management Automation solution in place.
FMs will spend less of their valuable time on mundane, repetitive tasks and instead dedicate their energy towards strategic, forward-thinking initiatives. As a result, emergency breakdowns are reduced, brand uptime increased, and the overall customer experience vastly improved. They may even have time to make that dentist appointment as scheduled.