Has your lab decided to cut operating costs in the coming year? Is one of the line items preventative maintenance (PM) for your lab equipment?
If increasing your return on investment (ROI) is also on your business plan, you should actually increase the amount spent on PM.
In 2000, Jones Lang LaSalle conducted a study attempting to assess the value of PM programs and the subsequent ROI. Their results? An investment in PM not only pays for itself but also produces a huge return on investment.
Determining the Financial Model
The study established a baseline of between 4.5 percent and 7.5 percent of annual operating costs was spent on repair and maintenance of equipment.
A statistical model was developed to not only quantify ROI but also to quantify the net present value (NPV) of investing in preventative maintenance.
Their research focused on 15 pieces of equipment looking at the following factors:
- Type of equipment
- Amount of equipment
- Size of equipment
- Age of equipment
- Annual preventative maintenance expenditures for equipment
To determine the value of PM, the study attempted to quantify the following:
- Actual cost of preventative maintenance
- Cost of repair/corrective maintenance
- Cost of replacing equipment
- Expected useful life of equipment expected useful life of equipment
- Effects of preventative maintenance on expected useful life
- Frequency of required repairs when equipment is not maintained
- Effect of PM on energy consumption
Preventative Maintenance Scenarios
Three PM scenarios were considered:
- No preventative maintenance – the company spends zero on preventative maintenance for any of its equipment.
- Current preventative maintenance levels – the actual amount spent on PM at the time of the study.
- Industry benchmark PM – spending the industry benchmark amount on PM for each specific piece of equipment.
For each scenario, the researchers calculated the yearly cost of operating a piece of equipment and built in a timeline of expenditures. The operating cost consisted of energy, repair maintenance, preventative maintenance and replacement cost.
The average life of each piece of equipment was used to determine when the equipment would need to be replaced. All expenditures were brought back to present value for each piece of equipment.
The Results of the Study
The analysis indicated an NPV of $2 billion over 25 years for a $39 million per year preventative maintenance program. This boils down to an ROI of 545 percent.
The French proverb, “penny wise and pound foolish”, describes preventative maintenance. Proper maintenance adds years to the expected useful life of a piece of equipment and avoids spending expensive capital for a replacement. The longer the capital expense can be delayed, the higher the ROI will be.
Finding the right PM plan to fit your needs can be time-consuming. BTS has three different Preventative Maintenance programs – choose the one that’s right for you and your ROI. Plan now to save costs next year – and for years to come.
Biotechnical Services, Inc. – We Bring Life to Research
 Koo, Wei-Lin and Tracy Van Hoy P.E. (2000) Determining the Economic Value of Preventative Maintenance: Jones Lang LaSalle