Asset Performance Management (APM)

Delivering Asset Performance Management ROI Requires Budget Changes


mobile_quality_management-1In a recent conversation with a long-time member of the greater Asset Performance Management (APM) community whom I have known for at least 20 years now, we discussed why many APM initiatives seem to fail to deliver the full scope of benefits they promise. This is particularly true of enterprise asset management (EAM) or computerized maintenance management system (CMMS) projects.

That is not to say that projects focused on reducing downtime through predictive maintenance (PdM) practices don’t struggle, but often the scope of those projects is narrowly focused at least initially on a few critical assets, and measurement of results is sometimes more straight forward. In EAM or CMMS projects, being much larger in scope, the justification is often a collection of smaller benefits like some MRO inventory reduction, overtime reductions, labor reduction as well as improvements in uptime and maintenance department efficiency.

Let's Look at Inventory Reduction Promises

It's not uncommon for an EAM/CMMS project to promise some reduction in MRO inventory and purchasing through better parts utilization. Typically the number is derived by combining the results of several related activities like purging obsolete parts from spare inventory, adjusting levels to reflect current usage, and doing some catalog cleansing to eliminate identical parts carried under multiple different part numbers. The promised savings usually amount to something along the lines of a 10% or greater savings. During project implementation the cleansing activity and the removal of obsolete parts frequently will yield some savings but these are one-time benefits that won’t deliver year-after-year savings. Other promised benefits generally are more elusive. The only way to ensure that you get those benefits is to force them on the maintenance organization. If the EAM/CMMS project promised a reduction in inventory as an ongoing savings then the best way that is going to happen is to actually cut the spare parts budget for the next year. If 10% savings was promised and the Stores/parts budget is $7.5 Million then for the next fiscal year reduce it to $6.75 Million. Manage to that number or be prepared to vise the real ROI you achieved from your EAM/CMMS investment.

The Same Goes for Labor

The other big ROI promise from EAM/CMMS projects is a reduction in maintenance labor costs. Virtually every EAM/CMMS project promises some reduction in labor either as a reduction in overtime or, more frequently, a reduction in headcount. This is based on the premise that the EAM/CMMS solution will better schedule the workforce and reduce the amount of idle and between-job travel time. In the case of overtime reduction, in many instance there is some improvement but it's often difficult to measure. One of the key reasons is that overtime frequently is more the result of unexpected events like weather caused outages, major failures, or turn-around activities, none of which the EAM/CMMS can dramatically influence. As to normal labor reduction, that too is often difficult to achieve since labor agreements may preclude staff reductions, attrition may take a long time, and the projected reductions may not occur in the time frame projected, or operating changes. The only way to guarantee that the projected benefits accrue is to reduce the budget then hold the responsible managers accountable. If production expansion or product changes are proposed that will absorb the labor that would have been cut, then those labor costs should be included in the cost of the ramp up and not buried and lost in the EAM reduction pool.

Tracking Downtime Reductions Versus Production Increases

One other benefit often used to justify EAM/CMMS projects is projected downtime reduction or uptime increase. Some companies are successful in actually documenting a change in downtime/uptime but often fail to link it back to specifics of how the EAM/CMMS project delivered those results. Frequently the project justification is based on more consistent PM, resulting in lower unplanned maintenance. Yet many organizations that implement an EAM/CMMS solution find that unplanned maintenance numbers may go either way and may or may not be correlated to actual availability numbers. This is most likely the result of factors like the classic P-F curve effects, changes in process or production, and even a change in raw material supply in some situations. The only way to truly track the results is to set precise measurable metrics tied to very specific operating conditions and then, if variations occur, being able to identify the change they would have had on availability had the APM projects not been implemented

Once you put proper metrics in place, adjust the budgets, and then hold everyone accountable for achieving those targets, actually realizing the benefits that you forecast is not as difficult as it may first seem. If this sounds a bit like Lean principles at work it's because there are some strong similarities. Lean is about figuring out what is the right thing to do, setting yourself up to do it consistently, and then measuring how well you do it, followed by a cycle of continuous improvement. Structure your EAM/CMMS implementation the same way, especially the metrics part, and you will be able to not only achieve the results you expected, but be able to prove that those results actually occured.

Understand the capabilities of twenty of the leading vendors in the APM space by downloading our APM Solutions Section Guide. The guide contains comparison charts for the factors listed above and the detailed profiles of the twenty vendors ranging from automation companies, to enterprise software providers and includes many specialized APM solutions as well.Asset Performance Management

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