Maintenance costs vs. revenue: how to calculate CMF

High-level fleet management depends on analyzing various performance indicators, one of which is the maintenance cost-to-revenue ratio (CMF, the indicator's Brazilian Portuguese acronym), linked to fleet maintenance.

This indicator measures the relationship between maintenance costs and the revenue generated by the operation, giving managers a clear view of the weight of maintenance expenses in company revenue.

Understanding this result is essential for making decisions that actually optimize (and even reduce) operating costs, without confusing revenue with profit.

Below, learn more about CMF:

• What the maintenance cost-to-revenue ratio (CMF) is
• Why this indicator matters to the fleet
• How to use CMF in fleet management
• How to calculate CMF
• When to use the maintenance cost-to-revenue indicator
• How to improve fleet management with CMF

What is the maintenance cost-to-revenue ratio (CMF)?

The maintenance cost-to-revenue ratio (CMF) is an indicator that measures the relationship between the maintenance costs of machinery, equipment and vehicles and the revenue generated by the corresponding operation.

It gives managers a clear view of how maintenance costs behave in relation to the revenue generated by the company.

When CMF is high, it means the activities of this department are consuming a significant share of company revenue. When it is low, it may indicate that maintenance management is efficient, but the result should be analyzed alongside other operational indicators.

Why does this maintenance indicator matter to the fleet?

The maintenance cost-to-revenue ratio allows you to identify areas of inefficiency and opportunities to improve maintenance costs.

By keeping track of this indicator, you can detect patterns that indicate recurring issues or excessive spending in certain areas.

CMF also enables informed decisions about fleet renewal, investments in new technologies and adjustments to maintenance processes. It can also help set goals for the maintenance team, encouraging more efficient practices.

How can you use CMF in fleet management?

Besides its main role, which is to show managers the impact of maintenance costs on company revenue, the maintenance cost-to-revenue indicator can also be used for other analyses in fleet management.

One possibility is to identify rising cost trends over time. Similarly, analyzing and understanding CMF across different periods (monthly, quarterly, annually) helps you understand whether the actions taken are resulting in continuous improvements.

You can also use this maintenance indicator to set goals in your fleet operation, whether directly or indirectly related.

For example, a direct goal could be to reduce CMF by 10% in the next six months. An indirect goal could be to improve maintenance team training.

In addition, CMF can help identify other areas for analysis.

If you notice an upward trend in CMF over the last 3 months, it may be time to assess whether vehicles need to be replaced, whether parts and service suppliers are delivering the expected quality, or even whether maintenance practices need to be reviewed and optimized.

How do you calculate CMF?

Calculating the maintenance cost-to-revenue ratio (CMF) is simple: just apply the formula. However, it is essential to have correct, highly accurate data to obtain reliable results.

To calculate the maintenance cost-to-revenue ratio (CMF), you need the following values:

• Total cost of maintenance: this includes all costs related to vehicle maintenance, such as spare parts, labor, third-party services, and the tools and equipment used, among others.
• Total revenue: this is the total revenue generated by fleet operations, such as transport contracts, freight services completed and other services provided.

The formula is:

CMF = Total cost of maintenance / Total revenue

When should you use the maintenance cost-to-revenue indicator?

The maintenance cost-to-revenue indicator (CMF) can be used at three main times:

1. When you need to assess the efficiency of your maintenance spending. The indicator is used to identify whether maintenance costs are affecting revenue disproportionately.

2. It is essential during budget planning. Knowing not only the current CMF but also how it changes over time enables informed decisions about where to invest and which areas should receive the available resources.

3. When setting goals for the fleet maintenance department. By analyzing the maintenance cost-to-revenue ratio, you can identify possible areas for improvement in your management and set your goals and priorities for the next period.

How can you improve fleet management with the maintenance cost-to-revenue indicator?

Analyzing CMF will allow you to develop various hypotheses about your fleet's maintenance management. These will give you the basis to also start identifying possible actions to promote improvements.

One possibility is to analyze maintenance history and the costs of specific types of issues, which helps identify trends over time and better predict the scheduling of less costly preventive services.

When you notice a maintenance cost-to-revenue ratio above expected levels, you can also try to understand the overall cost per vehicle in the fleet. This deeper analysis may reveal that some models need to be replaced.

Another idea for improving your operation is to assess your fleet's maintenance processes when you identify a high CMF. In doing so, you may find processes that are unproductive and inefficient and could, for example, be automated to save time and resources.
If you want to deepen your knowledge further and improve your fleet's maintenance management, sign up for our Maintenance Management Course taught by our specialist Emerson Bastos (in Portuguese).