When measuring total maintenance cost as a percentage of sales, the choice of using net or gross sales as the denominator depends on the specific context and purpose of the measurement. Both approaches have their own advantages and limitations, and the choice should be based on the desired level of accuracy and consistency with other financial metrics.
Using gross sales as the denominator can provide a more accurate reflection of the scale of operations and the resources required to maintain them. Gross sales represent the total revenue generated by the company before any deductions for operating expenses or taxes, and can provide a clearer picture of the overall level of activity in the business. Using gross sales as the denominator can be particularly useful for companies with high levels of fixed costs or capital expenditures, as they may require a larger maintenance budget to support their operations.
On the other hand, using net sales as the denominator can provide a more accurate reflection of the profitability of the company's operations. Net sales represent the revenue generated by the company after deducting any sales discounts, returns, or allowances. Using net sales as the denominator can be particularly useful for companies that are focused on improving their profitability, as it can provide a clearer picture of the effectiveness of the maintenance program in supporting the company's overall financial goals.
Ultimately, the choice of using net or gross sales as the denominator will depend on the specific context and purpose of the measurement. It is important to be consistent with other financial metrics and to ensure that the chosen denominator accurately reflects the desired level of accuracy and consistency in the measurement.
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MATTHEW GEHL
Program Manager Reliability
Rockwell Automation
Milwaukee WI
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Original Message:
Sent: 03-21-2023 11:45 AM
From: Gerald Watters
Subject: Measuring total maintenance cost as a % of sales
Measuring total maintenance cost as a % of sales<o:p></o:p>
Looking for some feedback/insight on measuring total maintenance cost as a % of sales:<o:p></o:p>
- When measuring against sales should it be against net or gross sales?<o:p></o:p>
- Maintenance cost includes labor and non-labor (parts), but should it also include replacement, refurbishment & repair capital?<o:p></o:p>
- What's a good benchmark for discrete manufacturing? The benchmarks I have currently is older at .9% for discrete and 3.9% for process. This is a large difference with automation cost rising should discrete be rising.<o:p></o:p>
Thanks,
Jerry Watters CMRP
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Gerald Watters
Sr. Engineer, Team Leader - Asset Reliability
Pella Corp
Pella IA
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