Cost-benefit of preventive maintenance vs. corrective maintenance

preventive maintenance cost benefit analysis

Preventive maintenance and corrective maintenance costs vary depending on organizations and their assets, but a cost-benefit analysis shows the way.

Asset industries require sustainable maintenance strategies to stay cost effective and competitive. These maintenance strategies can be divided into corrective maintenance (CM) and preventive maintenance (PM). Corrective maintenance identifies and corrects a maintenance fault after it has occurred, while preventive maintenance is carried out in an interval fashion, intended to prevent maintenance faults from occurring. Based on their assets and industries, companies may find it more cost effective to use one over the other. An effective preventive maintenance software system would follow the 80/20 Pareto principle – with either CM or PM taking up 80% of the maintenance costs and time.

Cost-benefit factors influencing preventive maintenance strategy

Each company’s needs are different and a cost-benefit analysis (CBA) should be run before a strategy is selected to decide how much of a total maintenance time and cost should be devoted to either CM or PM. Before selecting a maintenance strategy, companies should consider a number of influencing factors such as: costs of downtime, redundancy and items’ reliability characteristics. For example – if an item has a high reliability level – CM may be more cost effective. Further, companies must clarify which activities belong to preventive or corrective maintenance.

This can vary from organization to organization and requires an insider’s knowledge to decide. Once decided on – resources used for each activity should be registered in an CMMS preventive maintenance software system. Companies should be aware that in these systems, data quality and analysis will depend largely on human inputs – meaning there may be room for human error. Finally, companies should be aware that some costs may be difficult to estimate, particularly indirect costs and outsourcing costs (see this analysis in the Journal of Structure and Infrastructure Engineering).

A company must consider direct costs and indirect costs when deciding between CM and PM. Both maintenance systems are associated with direct and indirect costs. Direct costs are those for labor and materials, while indirect costs refer to everything else. Common operation and maintenance data involved are: maintenance times (administrative time, logistic time (LT) and active repair time (RT)), DT, delays, failures, remedies, causes and item information. The recorded maintenance data can vary between PM and CM, as well as between organizations.

To determine which maintenance system to use, a company must assign a monetary value to the operation and maintenance data mentioned above, and then run those values through a cost-benefit analysis. CBA is then meant to rationalize the decision a company makes, based on a cost-effective and long-term sustainability model. For example, if 70-90% of the maintenance costs are coming from CM-related activities, the company may choose to go to a PM maintenance system, which could in-turn remove up to 70 or 90% of their costs.

References: Christer Stenström, Per Norrbin, Aditya Parida & Uday Kumar (2016) Preventive and corrective maintenance – cost comparison and cost–benefit analysis, Structure and Infrastructure Engineering, 12:5, 603-617, DOI: 10.1080/15732479.2015.1032983