Aging Equipment Maintenance Costs: Not So Different from Increased Healthcare Costs for Elderly – Part 1
We all know that personal healthcare costs increase as you age. People start to have more health issues as they get older and costs for insurance, prescriptions, etc. continue to increase. The same applies for equipment. The more mature the equipment, the more likely it is to break down. As an equipment maintenance management provider, we work with our extensive vendor network to help extend the life of capital equipment assets. Sourcing parts for aging equipment can be a challenge for some because the costs to keep the equipment viable continues to go up. Remi can help you leverage your service dollars.
This blog explores the life cycle of aging equipment and discusses what influences the price for service.
First, let’s define the terms associated with the useful life of equipment:
Physical life is the time until the equipment no longer works.
Waiting to replace equipment after it no longer works is more costly because needed maintenance and repairs increase toward the end of the equipment’s life span.
Profit life is the period where the equipment is providing greater value than cost to the organization
Economic Life is the period during which the equipment offers the best value for the cost of ownership
Equipment maintenance costs are likely at their highest point when the equipment is new and just released to the market. At this point, the OEM is the only vendor that can service the equipment and can dictate the cost of service.
For equipment only a few years old, we see equipment maintenance costs start to decline. The reason for this is that Independent Service Organizations (ISO) start servicing and offering used parts along with the OEM. It’s a simple fact of supply and demand. The more vendors available, the more costs are driven down. End users can choose to use either the OEM who is traditionally a higher cost option or the ISO that offers lower costs. It is important to be very cautious with the OEM– if you sign a multi-year agreement, the OEMs traditionally include a year-over-year fixed increase to cover equipment as it ages.
An Alternative Solution
A solution, like Remi, is also an option as we can offer a unique alternative to equipment service contracts, providing both the OEM and ISO as options for repair. It’s at this time that preventative maintenance is critically important. Just like physicals and doctor checkups, equipment requires the same attention to ensure a long-lasting life.