Facilities management (FM) encompasses a scope of disparate support services covering physical space, infrastructure, and people. On the ground this means everything from maintaining property, buildings, equipment, and technology, to enhancing customer and employee experiences, preparing for emergencies, and keeping the soap dispensers filled. Complexity, inefficiencies, and potential hidden costs simply come with the territory.
Regardless of industry, FM spend turns out to be one of the larger expenses in a company’s income statement, and when noticed by the C-suite, often becomes a regular target for cost-cutting. According to global management consulting firm McKinsey & Company, FM spend can comprise as much as 10-25% of total indirect spending for organizations with distributed operations.
Understanding where your FM spend dollars are going, then, is a key step in improving operational efficiencies and accessing potential program savings. Still, full transparency into your facilities management finances is not always easy to achieve. It takes an integrated FM solution to provide the visibility needed to see how new efficiencies can be leveraged, cost savings delivered, and long-term strategic planning improved.
To start, here’s a primer on some of the major costs that comprise FM spend.
Repair & Maintenance Costs
You know the drill. When the HVAC goes out at one of your retail locations, you reach out to your go-to service provider. Not surprisingly, there’ll be an hourly charge for the time taken to complete the repair. But that’s not the whole story. There may also be a trip charge, overtime cost, and an emergency callout charge, too.
An integrated facilities management (IFM) solution such as NEST’s that uses a total cost model and pivots away from the legacy approach of hourly rates, trip charges, emergencies, and overtime mitigates this real-time escalation and makes budgeting a whole lot easier, too.
And of course, preventative (or proactive) maintenance (PM) helps a lot. An integrated computerized maintenance management system (CMMS) with smart technology and trend analysis more accurately identifies root causes of equipment failures, and schedules maintenance beforehand. Not only does this reduce the likelihood of breakdowns happening in the first place, but mitigates upkeep costs一to the tune of $5 saved for every $1 spent on PM.
Unplanned Downtime Costs
Aside from the fix itself, if a retail location can’t be occupied comfortably because the HVAC has shut down, that probably means less foot traffic. It might even mean closing the location until the unit is back online一and that’s lost sales right there.
The downtime will keep piling up if there’s a lag in determining a correct failure diagnosis. If you’re working with an independent service provider (ISP) unfamiliar with your HVAC system and its history, or with your system brand, that means more time offline, with more revenue lost.
NEST’s IFM solution includes a fully vetted ISP database with the provider you need when you need them. It also includes an integrated asset management database with history, notes, and photos available in real time, from anywhere, so diagnosis and repair times are minimized.
Importantly, NEST’s IFM solution also includes predictive maintenance functionality. Predictive maintenance analytics improve operational efficiency by using condition monitoring to warn users when an asset deviates from its normal operational behavior. This enables users to eliminate surprise failures, and even pre-empt a few. According to maintenance best practices resource site and magazine Efficient Plant, in 2020, predictive analytics reduced maintenance costs for organizations by 30%, boosted workforce efficiency by 25%, and improved unplanned downtime by 25%.
Service Provider Charges
It’s not uncommon for work order management software platforms to charge ISPs to use their technology. This access is often necessary for the ISP to receive and update work orders. The fee may only be a few dollars, but most of the time it gets passed on to you (in addition to their hourly rates), and that’s per location and per work order. Ouch.
With a comprehensive IFM solution such as NEST’s, however, ISP access to the technology platform is simply part of the solution一no additional provider fees are charged.
Work Order Management & Coordination
Managing facilities is a big job, and requires the right combination of talent, experience, and technology to do it right. To get a complete picture of your FM spend it’s critical to understand what has been paid for already, what has been billed and not paid, and what services have been completed but not billed. In short, every FM manager should be on top of their currently active, scheduled, completed, and deferred work orders. Time taken to chase the details results in longer downtime and a more reactive and costly approach to the job.
NEST’s CMMS, called Facilitate, provides customized end-to-end workflow automation that can keep track of the detail for you一both historical and in real time. As part of NEST’s IFM solution, Facilitate provides access to this and other valuable data to enhance program transparency, drive cost savings, and inform long-term financial planning.
Equipment Parts & Consumables
From HVAC capacitors to break room coffee filters, the cost of equipment parts and consumables can add up. And it’s easy to over- or understock without dynamic, real-time inventory tracking in your FM technology suite. This functionality, however, is included in NEST’s IFM solution, and even aligns with preventative maintenance schedules to optimize the benefits of both.
Invoice Processing Time
Processing ISP invoices can involve several steps: You often have to wait for a written quote, submit the purchase order, and wait a little longer for the actual invoice. That’s a lot of hours. When this process is automated, as with the NEST Facilitate platform, visibility and efficiency increase一with precious internal resources better deployed elsewhere.
Sure, that new CMMS system might be great, but you may be charged so-called “tech fees'' as part of your regular subscription expenses to use it. Tech fees are separate costs covering the ongoing development, build, and maintenance of your CMMS tech platform. Alternatively, NEST’s IFM platform covers all services in a single annual fee, without any tech fees added on.
How IFM Improves the Visibility of Facilities Management Finances
These are all real costs to your FM program, but due to their interdependent nature, many can be hard to quantify, let alone manage, in isolation. NEST uses a total cost approach to FM, which differs from legacy cost models in that it takes these interdependencies into account. The true cost of that HVAC breakdown will include impacts on workflows, service hours, maintenance schedules, retail traffic, and more. And it’s here一using the right KPIs一where inefficiencies can be uncovered and remedied.
When FM is addressed holistically, with an integrated, data-driven solution, operational efficiencies can be identified and implemented across the people, assets, and time used throughout your fleet.
With better program transparency, operations can be streamlined, budgeting simplified, and savings in your facilities management finances achieved. In fact, McKinsey & Company estimates that using the right comprehensive IFM can reduce FM costs by up to 15%, an order of magnitude that can meaningfully impact your company’s long-term financial and strategic planning.