The total cost of ownership and facilities management is a complex topic, but it is unavoidable. Successful facilities management programs focus on the value of optimized facilities total cost of ownership, taking a lifecycle approach to all decisions. Facility assets, the building, and facilities management processes and to the total cost of ownership. Unfortunately, Facilities Managers may focus solely on the total cost of ownership as it relates to a particular asset. To achieve optimized facilities total cost of ownership, Facilities Managers need to understand its challenges, impact on capital spend, and practices to overcome such issues.
Challenges in Assessing Total Cost of Ownership in Facilities Management
As explained by FM Link, Facilities Managers must take a systematic approach to balance facilities management needs. Life cycle costing is often the most effective way of assessing total cost of ownership for an individual asset will, and given approximately 90 percent of an asset's total cost of ownership is incurred after purchase, Facilities Managers must take note. Optimized facilities total cost of ownership does not negate this fact, but it uses this information to identify potential issues, increasing the total cost of ownership and overcoming them. Some of the primary challenges in achieving and optimized facilities total cost of ownership include:
- Fragmented market. Depending on the manufacturer, original equipment manufacturer (OEM) parts, components, and maintenance recommendations may change frequently, and a fragmented market only worsens this issue. Facilities management service providers also suffer from a fragmented market; there may be too many players for a single Facilities Manager to make an informed decision. Compared to multiple SLAs and contracts, the ability to optimize costs further diminishes.
- Immature supplier base. Facilities Managers may not have the resources or access to enough suppliers and field service vendors to maintain facilities properly. Lack of access to resources will result in deferred maintenance, delayed action, and increased total cost of ownership.
- Lack of data and transparency. The inability to refer to data will result in transparency problems, and decision-making becomes based on assumption, not fact.
- Poor asset visibility. Lackluster data has the natural result of poor asset visibility, which results in poor judgment and determination of asset lifespan. As noted previously, this could mean approximations of the total cost of ownership could be off by as much as 90 percent.
- Poor budget management. Inaccurate lifecycle costing of facility assets and lackluster visibility contribute to poor budgeting. If Facilities Managers do not understand expected expenses, preparing a budget is virtually impossible.
- Not utilizing technology. A final challenge in optimizing total cost of ownership lies in not using technology. Today’s technologies have grown remarkably, and technology can be deployed to track and manage facilities maintenance and management tasks. As a result, total cost of ownership increases when manual processes are used.
Optimized Facilities Total Cost of Ownership Is Key to Reducing Capital Spend
Reducing capital spend is the goal of all companies. Lower capital spend means healthier profit margins, and operating under the status quo works temporarily. However, things will go wrong, and assets will fail prematurely, resulting in a higher total cost of ownership. Optimized facilities management can reduce on-demand maintenance by up to 25 percent, save 5 percent on project management, reduce scheduled maintenance by 15 percent, and improve asset management by 12 percent. Of course, tapping into this level of optimization means overcoming the common challenges in the first place.
How to Avoid the Top Problems in Optimized Facilities Total Cost of Ownership
It’s time to think about problems and turn them into solutions. Although six common problems exist, the potential solutions are limited only by imagination and resolve. In other words, additional solutions may exist, but the top solutions to overcome the primary problems include the following:
- Vet field service vendors, and hold field service vendors and providers accountable.
- Expand your supplier base. This may include negotiating new SLAs with existing contractors and hiring additional suppliers/ service providers.
- Track asset function and make asset reports available to stakeholders and authorized personnel. Asset function is integral to calculating accurate TCO, and such information should be shared with relevant parties.
- Increase servicing and monitoring of assets, and keep asset documentation/ information in a centralized location. Frequent, scheduled maintenance of assets can reduce TCO, but using advanced monitoring tools, like big data analytics, can further manage TCO.
- Use data in making budgeting decisions, and retain a portion of the budget for emergencies. All budgeting decisions should be based on data, not an assumption; this improves stakeholder confidence in facilities management professionals and streamlines operations. The end result is agile budgeting.
- Use technology to simplify the aforementioned steps. Technologies used may include cloud-based platforms, computerized maintenance management systems (CMMS), energy management systems, automated platforms, and interactive voice response (IVR) platforms. The options are limitless.
- Compare savings against costs, and present results to stakeholders. Optimized facilities total cost of ownership is only as good as the reports given to stakeholders, and reporting must reflect data-based results.
- Collaboration is key to reducing conflicting views in facilities management, reports Bruce Wesner of FacilitiesNet, allowing managers to focus on improvement, not conflict resolution. Ironically, technology improvements have the added benefit of improving collaboration too.
- Take stock of lessons learned, and repeat the process, upgrading technology and processes as necessary. Continuous improvement is the cornerstone of optimized TCO, and all staff members should work to find faster, more efficient ways of completing the same activities and identify ways that future actions can be improved. This may include the conducting on in-services on a frequent, repetitive nature.
Act Now to Avoid These Problems
Finding the best way to reduce total cost of ownership in facilities management is not always clear, but overcoming the problems in optimizing asset longevity is when facilities managers follow these steps. Stop trying to manage total cost of ownership without correcting these problems first, and discover what it is like to truly use the right resources and tools in determining expenses and gaining visibility in your facility. In fact, contact QSI Facilities now to get started.