Generating cost savings in facilities management

Summary

It is well known that facilities managers have been pushed to contain their costs for many years. It is also well known that some of the larger providers have been bidding on contracts at low single digit margins (often sub-5%) to win business, fully aware that ‘at best’ their margins will be increased only by pushing work that may not actually be required or is priced uncompetitively or just spending longer on site. For too long the industry has looked at a lower hourly cost card as the answer to savings. Perhaps what happens most often is that the service delivery is of a very, very low quality. 

This has had huge follow on effects within the industry as the competitive pressures have forced tender margins down across the board. Obviously this is not sustainable, nor a good outcome for customers, so we wanted to illustrate how facilities managers and their companies can save money in a way that does not result in contract and supplier churn and can deliver long-term rather than short term benefits (which are often artificial). 

At Homyze, we are honest and transparent with our customers as far as what the savings levels are likely to be, and the time that it will take for them to be realised. This is influenced by factors such as the level of information that they have about their costs, asset base and spend prior to our engagement. In most situations we will be looking to deliver cost reductions of 10 - 15% of annual maintenance spend, but the areas from which this comes and the time by which it is realised differ from one client to the next. 

Outsource

One of the ways in which cost savings can be achieved is by outsourcing some of the costs associated with delivering your facilities management solution (see our article on whether you should do this here). This is one of the ways in which companies are increasingly looking for (and realising) cost savings, but it can offer more than just financial benefit. Utilising outsourcing can mean a company gets access to increased range of skills or specialisations, benefits from purchasing power and may allow companies to get access to more data than they would otherwise thereby driving richer insights.  For a lot of companies, however, absolute cost savings is the primary driver for their outsourcing strategy. 

This may involve using a third party to deliver the helpdesk function which might otherwise be either a standalone business department for the client, or additional responsibilities for their employees whose primary role is something else. 

Helpdesk resources are very difficult to manage, both in terms of personnel but also in terms of balancing resources and requirements. Maintenance tasks are often difficult to forecast and as a result you can find that they are often overly stretched or over-resourced. Moving these fixed costs to variable costs or using a third party that benefits from scale may be able to reduce this element of your FM costs. 

Savings from CAFM Software

Insights, trend analysis, asset level operating information

There are two primary ways in which CAFM software can deliver savings to users. The first is by more efficiently handling maintenance, be that reactive, planned or compliance. The degree to which this is a component of the cost savings is affected by the processes and procedures that using the CAFM replaces. For example, many companies have been using manual and even paper-based procedures to store and control information flow between customers and contractors. 

Ways in which CAFM software can generate savings in this regard include providing e.g. users, tenants and site managers with access to the app or web portal so that they can report issues themselves rather than having to relay them to another party. This can not only lead to miscommunication and information breakdowns but it is a direct saving of the helpdesk costs. Not only should a system allow for this issue reporting, but it will also update the reporting party of changes in job status such as the work order being allocated or the intended arrival time. Again, this saves time that would normally have been spent by the helpdesk. In addition to this, moving word orders, reminders, notifications (such as quote chasing or compliance requirements) automatically through the system can lead to significant savings for most clients. 

The second way in which CAFM software can save costs is by storing (and even better, surfacing) data that can lead to a reduction in maintenance spend. 

Another example of the way in which CAFM software can deliver savings through collection and dissemination of information stored within the system would be where a particular asset has abnormally high maintenance costs that make it more cost effective to replace the asset than continuing to repair. Switching maintenance strategies, e.g. from run to destruction or reactive maintenance to a planned maintenance strategy can save up to 30% of associated spend. 

One should also consider the way in which a more robust compliance management system as part of the CAFM could have positive effects for the business - not just in terms of reputation enhancement and higher customer satisfaction but also in terms of potentially avoiding fines and penalties. 

Indirect Costs

Indirect costs refer to those costs that are not directly associated with a process or project, but which are expenses incurred in the normal course of the company conducting its operations. An example of indirect costs would be the People/Human Resources departments within a retail organisation. 

Below is a table that outlines some of the indirect costs that are associated with running a facilities management department or function within an organisation. 

All of the above are just some of the ways in which Homyze works with our customers to realise their objectives when it comes to facilities management and property maintenance. The path to success varies across each of our clients, depending on their unique priorities and existing processes. 

We would welcome the opportunity to discuss any of this with you to see how Homyze can help in your situation.