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" Infor makes business software better. Infor EAM Business Edition is a web-based enterprise asset management solution, enabling mid-size enterprises to control asset-related functions without the investment or implementation time required for large-scale installations."
Source : Infor
Asset Performance Management: The Secret to Uncovering Hidden Profits and Ending Operating Surprises
Enterprise Asset Management is also known as :
Asset Management Software,
Asset Management Solution,
EAM Applications,
Asset Performance Mgmt,
Asset Lifecycle Management,
Performance Management,
IT Asset Software,
Computerized Maintenance Management System,
Maintenance, Repair and Operations,
Building Lifecycle Management,
Performance Management Development,
Predictive Models,
Performance Management Process,
Maintenance Management Solutions,
>WHAT IS ASSET PERFORMANCE MANAGEMENT?
Top performers optimize their assets. It's true in any field"sports, the arts, and business. Yet in business,
optimizing performance of capital assets often plays distant runner-up to the more glamorous pursuit of topline
growth. That's not surprising, given the importance of increasing sales revenue and growing a customer
base. But it can be costly. Under-performing capital assets leave tremendous profit potential on the table"
potential estimated to be as much as 10 percent improvement to the bottom line annually, with up to 30
percent reductions in operating costs.1
Insufficient attention to optimizing assets can also lead to operating surprises that are even more punishing.
Consider the prominent pharmaceutical firm that, due to production processes deemed unsafe by the Food
and Drug Administration (FDA) and its UK counterpart the Medicines and Healthcare products Regulatory
Agency (MHRA), was barred from providing more than 45 million doses of flu vaccine to the United States.
It lost more than $100 million in revenue, took a charge of 36 cents per share, and saw its stock price
plummet more than 30 percent2"all because critical capital assets and processes in its manufacturing
operations were managed inappropriately.
Or consider the public water utility whose quality-control problems in 1993 with storm run-off systems and
purification processes led to almost $200 million in medical and facilities expenses, and more tragically, to
more than 100 deaths.3 The disaster could have been avoided if the utility had the ability to more effectively
model and predict asset performance for circumstances like those that lead to this disaster.
The solution to achieving hidden profit potential and avoiding costly operating surprises is Asset
Performance Management. Asset Performance Management combines best-of-breed enterprise asset
management (EAM) software with the power of cross-functional data analysis and advanced analytics.
This enables organizations to make decisions that optimize not just their assets, but their operational
and financial results.
WHY IS ASSET PERFORMANCE OPPORTUNITY A SECRET?
ARC Advisory Group may have said it best. "Investments in capital assets are staggering"billions of dollars
invested in hundreds of plants worldwide. While the nature of the assets may differ"acquiring, maintaining,
and disposing of these assets is a very serious business. A one percent improvement in performance can be
worth millions annually."4
How this magnitude of profit potential could remain a secret remains a mystery, particularly in today's tough,
cost-constrained operating environment. But it has a lot to do with the realities of organizational culture and
the traditional role of asset management. Asset solutions have long had a visibility problem. They have
traditionally been marketed to and run by an organization's maintenance personnel. Unfairly, maintenance
carries a stigma, even though it is critical"accounting for as much as 50% of some organizations'
operational expenses. But it is also unglamorous and has resulted in asset solutions being hidden from
executive level attention. The benefits of asset solutions are no secret to maintenance managers worldwide,
but those benefits have yet to percolate to the top of the executive suite.
1 Datastream
2 Dow Jones Equity News
3 Milwaukee Journal Sentinel
4 ARC Advisory Group
THE EVOLUTION OF ASSET PERFORMANCE MANAGEMENT
Asset Performance Management has the power to overcome the maintenance stigma because it has the
power to change operational performance. It completes the evolution from maintaining assets to optimizing
assets for higher profits and better overall performance on the bottom line.
Figure 1: Evolution of Asset Management
|
CMMS |
EAM |
Asset Management Performance |
| Purpose |
Automate procedures |
Optimize
asset performance |
Optimize asset impact on
operational performance |
| Scope |
Site-by-site |
Enterprise-wide |
Enterprise-wide |
| Data |
Maintenance procedures |
Maintenance transactions |
Performance data from Maintenance,
HR, Finance, Operations, Others |
| Answers |
When do we turn
wrench?
When do we order
replacements? |
How do we extend
asset life?
How do we reduce
asset downtime? |
How do we use asset to reduce
operational costs?
How does asset affect
bottom-line performance? |
Understanding how and why this is true requires just a brief description of how Asset Performance
Management has progressed from earlier asset solutions. First-generation solutions, known as Computerized
Maintenance Management Systems (CMMS), are essentially a way to automate a maintenance to-do list"
when to turn the wrench on a certain piece of equipment, when to order replacement parts, and so on. The
next generation, Enterprise Asset Management (EAM), focused on how to track and manage an asset's
performance"how to extend the asset's life and reduce its downtime. For example, if an organization has
200 forklifts across 10 sites, and 150 are productive and 50 are not, the company can analyze maintenance
transactions associated with the better-performing lifts"which manufacturer made them, when and how
often they are maintained, what comprises preventive maintenance, and so on"and then use those findings
to improve performance.
Asset Performance Management builds upon and extends EAM by combining asset management,
maintenance and tracking with the ability to use this data to improve operational decision-making.
EAM answers the question, "How do we get the most out of an asset?" Asset Performance Management
answers the question, "How does the asset affect operational performance?" APM supplements enterprisewide
maintenance transaction data with data from other silos in the organization-such as finance, human
resources, inventory, and production-and provides the advanced analytics necessary to identify correlations
and trends, thereby improving operational decisions and results.
Consider a chief operations officer with the goal of increasing production output enterprise-wide by 10%
through a more efficient production process. Using Asset Performance Management, the COO might look
across the organization and notice that where production lags, a high number of reactive work orders are
being issued, and that where this is true, there is also a spike in the use of contracted labor. This leads to
the conclusion that increased use of contract labor directly decreases both equipment (asset) efficiency
and production output. Information drawn from HR, production and maintenance data enables the COO
to isolate a problem, predict the impact, and decide what steps to take for improvement.
HOW ASSET PERFORMANCE INFLUENCES ENTERPRISE PROFITS
The relationship between assets and bottom-line profits typically receives scant attention from upper
management. This is another reason why the profit potential of Asset Performance Management remains
something of a secret from the broader organization. The good news is that because this potential is
overlooked, executives and organizations seeking top performance have new profit opportunities. Consider
just a few ways that Asset Performance Management positively impacts the bottom line.
Reduced Production Costs and Increased Capacity
Asset downtime disrupts production and drives up both process and per unit operating costs. Executives
often lose sight of this because they focus on output, not on the assets used to create it. As one CFO put it,
"Companies care about how many cans they make, not the can machine." The irony is that companies can
use Asset Performance Management not only to make more cans, but to make each can more profitably.
This is because Asset Performance Management can:
- Increase the availability of assets through reduced downtime and improvement in Overall
Equipment Efficiency (OEE)
- Reduce capital investment in assets by 15% or more through improved preventive and
predictive maintenance and more efficient labor deployment
A specific example comes from a food manufacturer that recently deployed Asset Performance Management
with the goal of using longer manufacturing runs and improved uptime to increase manufacturing efficiency
from 87% to 92% and create $7M more in sales, with no additional manufacturing costs.
Reduced Revenue and Operating Losses from Asset Failure
As discussed earlier, little matches the punishment inflicted on an organization when critical assets fail.
Whether it is a faulty sewer line or a poorly calibrated vaccine machine or a broken oil rig, asset failure
can create significant revenue and operating losses. The stakes grow even higher in regulated industries-
such as pharmaceuticals, healthcare, food & beverage, and biotechnology-as well as in the highly
regulated public sector. Consequences of noncompliance can include not just lost revenue, but fines,
plant or location closings, litigation, damage to reputation, and a loss of investor confidence that can
pummel a company's stock price. In the public sector, a loss of taxpayer confidence can reverberate
through all levels of government.
Asset Performance Management reduces the prospect of revenue and operating losses by ensuring:
- Forward-looking Risk Management Asset Performance Management allows organizations to monitor,
model and forecast performance against stringent requirements and key performance indicators (KPIs)
across an organization, enabling them to detect problems with high-risk equipment before failure occurs.
- Regulatory ComplianceCombining Asset Performance Management principles with Datastream 7i
functionality such as in-depth asset profiling, calibration report documentation, electronic signatures,
and audit trail tools enables companies to stay compliant with government regulations including the
FDA's 21 CFR part 11, standards set by the Joint Commission of the Accreditation of Healthcare
Organizations (JCAHO), the Occupational Safety and Health Administration (OSHA), Governmental
Accounting Standards Board statements 34 and 35 (GASB 34/35) and the Environmental Protection
Agency's Capacity, Management, Operation and Maintenance (CMOM) program.
-
- Improved Asset Quality and Reliability. AssetPerformance Management enables predictive failure
analyses and preventive maintenance strategies that keep assets performing longer, better and more
reliably. Predictive modeling allows organizations to forecast likely failure points and causes and
proactively take corrective measures. Organizations can pinpoint unreliable assets, suppliers and
processes, predict reliability issues before they happen, and plan for an asset's timely disposal.
- Reduced Inventory and Inventory Carrying CostsAsset Performance Management can help organizations
reduce inventory of heavy machinery and equipment while also reducing spare parts inventory. Premier
Manufacturing Support Services has used Asset Performance Management to eliminate the need for
more than 60 trucks at one of its 42 plants in just eight months without affecting productivity,
reducing its equipment inventory by one-third. The same kind of fine-tuned planning and forecasting
can reduce spare parts inventory by 20-30% and reduce inventory carrying costs (such as storage,
insurance, handling, and others) by an additional 20%.
- Increased Warranty RecoveriesUnclaimed warranties add up to significant sums for asset-intensive
organizations-sums that can be added directly back to a company's bottom line. Consider the
example of Coast Mountain Bus Co. (CMBC), a Vancouver, Canada-based transit company with 24,000
assets and more than 56,000 parts records. CMBC uses Asset Performance Management to maintain
a complete fleet database to define and maximize multiple warranty recovery for different pieces of
equipment. When a work order is opened on equipment with a valid warranty, the system immediately
flags it as warranty work and all labor and associated costs can be captured and a proper claim filed.
In CMBC's case, the result has been $950,000 of recovered warranties in 6 months' time.
- Reduced Labor CostsWith Asset Performance Management, organizations can model different
scenarios to determine optimum maintenance schedules. They can focus labor resources on
preventive rather than reactive work, so that more is done in less time with fewer delays and less
overtime. In addition, because Asset Performance Management automates functions such as parts
ordering, purchasing and payments, less labor is required.
- Reduced Capital OutlaysAsset Performance Management improves the reliability and extends
the useful life of fleet and heavy equipment, to the extent that new equipment purchases can
be reduced at levels of 3-5% annually.
HOW BUSINESS METRICS FURTHER OPTIMIZE THE
OPERATIONAL IMPACT OF ASSET PERFORMANCE
Any success-driven organization with significant physical
assets can tap some or all of the preceding sources of profit
improvement using Asset Performance Management. Yet
as in all things, success depends on setting goals and
establishing metrics that can be used to manage and
measure results. This is especially true when an organization
directs Asset Performance Management toward specific
asset-related operating problems. The more calibrated the
metrics, the more powerful and measurable the results.
Take the example of a large regional grocery chain with 140 stores in the United States. In the grocery
business, perhaps the most critical capital asset is the refrigeration equipment that keeps high-dollar items
cold like meat, produce and other refrigerated and frozen foods. If that equipment fails and the problem
goes undetected, spoilage costs can be enormous. In the past, this organization, like many grocery
companies, monitored refrigeration equipment store by store. It lacked visibility into the performance of the
equipment company-wide. As a result, it was forced to be reactive-if equipment went down at a given
store, the only hope was to discover the problem immediately and fix it as quickly as possible.
Now, with Asset Performance Management, the company is implementing a proactive solution for optimizing
performance of the coolers enterprise-wide. The solution features a centralized, unified view of all
refrigeration systems across all stores. This enterprise-wide solution adds the ability for the company to
make decisions that directly improve operational performance, through monitoring and analysis of
specific operational metrics such as:
- Temperature vs. energy consumption and cost
- Maintenance cost vs. temperature trend
- Cooler efficiency by store
- Preventive maintenance compliance vs. refrigeration alarms, spoilage incidents,
and refrigeration leak rates
These metrics go beyond the standard transactional maintenance metrics of EAM because they depend on
data from multiple systems-asset, finance, operating and others-not just the maintenance system alone.
In addition, the modeling and trending tools offered by Datastream 7i Analytics enable a forward view on
that data, unlike traditional reporting tools which simply visualize current transactional data. By analyzing
these cross-silo metrics, the company can now decide which coolers run most efficiently, how temperature
control affects cooler performance, what the appropriate maintenance cost per cooler should be, what level
and schedule of maintenance is optimal. It can, in short, be completely proactive about optimizing
equipment uptime at a lower operating cost.
THE ANALYTICS COMPONENT:
How to Elevate Asset Performance Management to Meet Strategic Operational Goals
Defining business and operational drivers for a successful Asset Performance Management deployment
serves two purposes. First, it allows organization to concretely assess the financial impact to the enterprise,
as well as the ROI of individual projects. Second, it creates the framework for capturing quantitative data
that can be examined with advanced analytics to trend relationships between assets and performance, model
what-if scenarios, forecast results, and lead to better-informed, forward-looking decisions.
Consider the example of a municipal water and sewer utility that serves 400,000 customers across
1,200 square miles in a major metropolitan area. One of the utility's strategic operating goals is to
proactively plan to reduce levels of contaminants, like nitrates, in the water supply; sources of
contaminants include raw and/or treated wastewater and runoff from fertilizer. The organization could
use the advanced analytics component of an Asset Performance Management solution to compare such
things as land use and residential growth rates to potential increased levels of such contaminants.
Combining this with maintenance transaction data on metrics-such as number of sewage overflows by
blockage type, response time to sewage overflows, and number of blockages per 10,000 feet of linear
asset-the organization could correlate relationships between land use, maintenance procedures,
and nitrate levels. Those correlations, in turn, would allow better decisions about how to change and
invest in infrastructure to reduce nitrate levels going forward-while also reducing the costly exposure
that would result if contaminant levels were ever deemed too high.
Or, consider the company in the aviation sector that uses the advanced analytics component of Asset
Performance Management as part of its baggage handling system. With these advanced analytics, the
company can correlate weather information from one system to work-order history in another system, to
baggage reports coming from a third system. By making these correlations, they can determine how
weather patterns and seasons impact passenger traffic and equipment usage so they can plan operations
more accurately and ensure that equipment is running at optimal efficiency when they need it.
These examples illustrate how the advanced analytics component of an Asset Performance Management
solution must do more than improve the visualization of maintenance transaction data, which is what some
EAM providers derive from so-called business intelligence solutions. Instead, it must be able to take the
business intelligence principles traditionally used in supply chain and customer relationship management
applications and apply them to capital assets. Organizations can then answer questions such as:
- How investment in and deployment of assets will improve operating profit?
- What assets pose the greatest risks to revenue streams and operating efficiency, and how
can those risks be mitigated?
- What operating conditions create the best ROI for asset deployment?
- How can asset deployment and maintenance advance strategic operating goals?
- What are the costliest assets and how costs best controlled?
- Which sites and departments are likely to optimize asset and operating performance and
which are likely to under perform?
- What will the positive ripple effects be when asset availability is optimized?
Datastream 7i with integrated Analytics and other modules is, in short, the embodiment of Asset
Performance Management. For executives and organizations aspiring to top performance, it may be the
single most powerful tool available to optimize profits, avoid operating surprises and assure smooth
quarter-to-quarter delivery of projected financial results.