What maintenance really costs: CGM, CIM, CFM and CAM explained

In one line

The real cost of maintaining a piece of equipment is not what shows up on the work order: it is the sum of what it costs to intervene on it, what it costs when it fails, and what it costs to keep spare parts in storage waiting — and the second one is usually the biggest of the three.

What it is

When someone says "how much do we spend on maintenance," they almost always mean a single number: labor plus spare parts consumed. That number has its own name and is only one part of the full picture. The cost structure used in the Manual del Ingeniero de Mantenimiento (Maintenance Engineer's Manual) divides the spending into four categories:

• CIM — Maintenance Intervention Cost: what it costs to do the maintenance work itself. In-house or contracted labor, spare parts and materials consumed, use of special tools and equipment for the intervention. This is the "visible" cost, the one that comes straight from closed work orders.
• CFM — Maintenance Failure Cost: the economic impact of the equipment not being available when it is needed. Lost production, penalties for late delivery, the cost of using backup or rented equipment, and in the worst case, safety or environmental costs. This is the "invisible" cost: it does not appear on any work order, it lives in the production and finance numbers.
• CAM — Maintenance Storage Cost: what it costs to keep spare parts in the storeroom — tied-up capital, warehouse space, insurance, and the risk of obsolescence and deterioration. It is the flip side of the CFM: less stock lowers the CAM but raises the risk of a part being missing right when it is needed.
• CGM — Global Maintenance Cost: the sum of the previous three. CGM = CIM + CFM + CAM. This is the number that really matters for deciding whether the maintenance function is sized correctly, not any one of the three on its own.

What it is for

Splitting the cost into these four categories serves one concrete purpose: to stop making decisions by looking only at the CIM. It is common for management to ask to "cut maintenance spending" and for the automatic answer to be to trim preventive hours or postpone component replacements — that lowers the CIM in the short term, but if the equipment starts failing more often, the CFM goes up by much more than what was saved in CIM, and the total CGM ends up higher than before the cut. The CGM/CIM/CFM/CAM framework exists to make that effect visible before it happens, not after.

The same applies to the CAM: reducing the stock of critical spare parts "to free up capital" lowers the CAM, but if that part is missing the day the equipment breaks down, the cost of the extended downtime (CFM) can be several times what was saved on inventory.

How it is applied

In practice, building this calculation does not require a sophisticated system — it is enough to track four numbers per period (month or year) and watch the trend, not a single snapshot:

1. CIM: add up labor hours (in-house and contractor) at their hourly cost, plus the value of spare parts and materials consumed on closed work orders.
2. CFM: hours of unplanned downtime per piece of equipment, multiplied by the cost of one hour of downtime on that line (contribution margin of what was not produced), plus any associated contractual penalties.
3. CAM: average value of the spare parts inventory over the period, multiplied by a carrying cost rate (typically between 15% and 25% per year, covering tied-up capital, space, insurance and obsolescence).
4. CGM: the sum of the three, tracked over time. A CGM that rises because the CIM goes down and the CFM goes up by more is a classic warning sign of a badly done cut.

A CMMS specifically helps with this calculation because it is the only tool that brings together data from the three categories in one place: work orders and spare parts consumed (CIM), downtime hours per piece of equipment (input for the CFM) and inventory levels (CAM). Without a system like that, the information is usually spread across maintenance, production and purchasing, and nobody builds the complete CGM.

Real example

The cited CMMS guide includes a numerical case of its own to illustrate how to calculate the return on investing in maintenance management (in this case, in a CMMS), which serves as an example of the same CGM reasoning: spending more on management (CIM) to avoid a larger cost later.

The case: implementing a CMMS costs USD 14,000 and is evaluated over 5 years. Over that period, the sum of documented savings — automatic generation and closing of work orders, less excess inventory, faster condition audits, automated reports instead of manual ones — reaches USD 32,000. The return on investment (ROI) turns out to be:

ROI = (32,000 - 14,000) / 14,000 = 1.29

In other words, the investment is not only recovered: it returns an additional 129% on what was invested over the evaluated period. The same guide includes a second, simpler payback period example: a CMMS that costs USD 3,000 and saves USD 5,000 in the first year pays for itself in a little over 7 months.

The point for the CGM logic is this: that USD 14,000 investment is additional CIM (you spend more to manage better). The USD 32,000 return comes from reducing CFM (fewer stoppages thanks to better failure tracking) and CAM (less excess inventory) at the same time. The total CGM goes down, even though the CIM went up.

Benefits

• It forces you to look at the complete maintenance cost, not just the part that appears on closed work orders.
• It gives you a numerical argument to defend the preventive/predictive budget against a cut request: show the CFM expected if the CIM is reduced.
• It lets you compare spare parts stock decisions (CAM) against the real risk of downtime (CFM) instead of deciding by gut feeling.

Limitations to keep in mind

• The CFM is the hardest to calculate accurately: it requires production data (contribution margin, penalties) that maintenance often does not have at hand and has to request from another area.
• The carrying cost rate used for the CAM (15-25% per year) is a general reference, not a fixed number — each plant should calculate its own based on its cost of capital and warehouse conditions.
• Building the complete CGM requires data from at least three areas (maintenance, production, purchasing/warehouse); if nobody is in charge of pulling it together, the exercise is quickly abandoned after the first attempt.

In summary

The real maintenance cost is CGM = CIM + CFM + CAM, not just the CIM that shows up on work orders. Most maintenance budget cuts lower the CIM without measuring the impact on the CFM, and end up raising the total CGM instead of lowering it. Measuring the three together, even if only approximately, is what lets you defend — or question — maintenance spending with numbers instead of intuition.