Maximum Return

Dec. 21, 2004
Manufacturers are using asset-management programs to put the brakes on breakdowns and maximize equipment management.

Inside an auto assembly plant in Gothenburg, Sweden, it's a typical scene on a fairly typical day. A new car should be rolling off the line every 72 seconds, but a malfunction in a complex power tool on the track -- where cars move steadily from one assembly position to the next -- has stopped the vehicles dead. Senior managers at this Volvo Cars facility inspect the equipment. Repair technicians flood to the scene. Yet nearly 50 minutes pass before crews can diagnose the issue and get the repair completed. The downtime results in lost production. In fact, nearly one third of all stoppages at the facility result in delays that reduce output. Now the Volvo plant is beginning to put the brakes on breakdowns using an asset-management software package called Maximo from MRO Software. Managers use the system to analyze the reliability of different assets and the cost of maintenance materials. They also can see which assets are most critical and which endure the highest demands. Using this approach, Volvo expects to save $3.7 million over the next three years while using space and resources more efficiently. Maximizing uptime is especially important for Volvo, which plans to expand production output by more than half over the next two years without adding any new plants. Anything but glamorous, asset management suddenly is attracting a good deal of attention -- particularly in today's tough economic climate. And no wonder. The economic reasons are clear. Leveraging plant floor information and plugging it into a companywide ERP system can yield tremendous payoffs. Predicting the reliability of a key piece of machinery and making that information available throughout the enterprise is often the difference between a few minutes of scheduled preventive maintenance and an entire assembly line shutting down for hours. Nor are manufacturers the only ones that have noticed the benefits that come from smart asset management. ERP vendors such as SAP AG, JD Edwards and PeopleSoft Inc. have added asset-management modules in their core applications or provide them as add-ons. Other firms, such as Indus, Datastream, Rockwell Automation and MRO Software, have introduced an array of specialized solutions. Although the exact definition of enterprise asset management (EAM) varies -- each vendor has its own ideas about what constitutes asset management -- it generally centers on creating an inventory of all property, plants and equipment; tracking their usage; analyzing maintenance schedules, repair frequency and reliability; predicting parts failures; and maintaining information about leasing, contractual information, warranties and service-level agreements. "Over the last few years, organizations have made significant investments in their infrastructure and assets," observes Alfred Sanders, a senior manager for KPMG Consulting. "Unfortunately, there is a limited understanding of what all these assets provide, what kind of return they bring, and their actual cost to the organization. The lack of knowledge about assets costs companies a great deal of money and efficiency." According to ARC Advisory Group, a Dedham, Mass., market research and consulting firm, EAM became a $1.2 billion industry in 2001 and will grow to $1.8 billion during the next five years. Not only are companies turning to asset management in increased numbers, they're embracing more sophisticated solutions that use the Web and wireless technologies to extend the reach of applications across a far-flung enterprise. The goal with any asset-management strategy, says Leif Eriksen, a research director at AMR Research, Boston, is to drive down costs and manage existing assets more efficiently. "Armed with greater information, companies can use equipment more efficiently and optimize overall performance." Managing property, plants and equipment is essential, and getting a handle on maintenance and repair issues is crucial, he says. At Volvo, collecting information about every part used in the manufacturing process is only the beginning. The company has tapped into data about the reliability of different assets and the cost of maintenance materials to make key business decisions, says Hakan Berndtsson, general manager of plant maintenance at Volvo's Torslanda plant in Gothenburg. That includes understanding which assets use the least materials, labor and equipment and then making procurement decisions based on the data. It also means analyzing how different critical assets fare in high-demand situations and arming production managers with the information so that they can take corrective action early or schedule maintenance and repairs at optimal times. Ultimately, that has forced the firm to confront some tough issues, such as why it might keep an engineer on standby for an asset of marginal importance when it takes three hours to summon an engineer for a breakdown of a more critical asset. The initiative is helping Volvo shift its asset-management program into high gear. Over the next three years, Volvo expects to save about US$3.7 million at the Torslanda facility. Berndtsson believes that the savings will continue to accelerate for several years. "We are now conducting an informed debate about how to generate more value from assets," he says. "We're becoming a far more efficient company." Yet, enterprise asset management is more than a tool for monitoring equipment and scheduling maintenance and repairs. Houghton LeRoy, director of consulting at ARC Advisory Group, says that the current spate of applications is helping companies become more savvy when it comes to optimizing lifecycle costs. "In the past, companies focused primarily on operations and maintenance costs," he says. "Today, they're turning to tools that can help them understand when to buy, when to repair and when to sell an asset." This life-cycle approach can provide benefits on a number of fronts. For one thing, it helps identify equipment that's obsolete or no longer cost efficient to operate. For another, it ensures that a company doesn't overpay for machinery, trucks, dollies, hardware and other items, while serving up data about when it's best to make or defer a purchase -- or sign a lease. And, when the time comes to liquidate certain assets, an organization can determine whether it's best to mothball or auction off a given piece of equipment. Understanding how to use assets most effectively can prove daunting. That's why LeRoy suggests that companies pay close attention to key performance indicators that are part of what he describes as the "metrics triangle." These include cost efficiency, quality and speed. "The three factors must be balanced out because if you lean too heavily on one, another will likely suffer." One company that has embraced this approach is Atlantic Copper, a leading European metal manufacturing firm with smelting plants in Huelva, Barcelona and Cordoba, Spain. It uses condition-based maintenance (CBM) and a computerized maintenance management system (CMMS) from Rockwell Automation and MRO Software to analyze assets across the enterprise. The company now has detailed data about equipment that's available and can instantly compare its general ledger and accounts payable data with what's on the plant floor. In addition, workers can see if certain breakdowns or failures recur, the last time someone inspected or repaired a machine, and if a pending work order already exists for a particular piece of equipment. According to Carlos Rich, technical knowledge manager, one of the biggest asset gains has been a result of the CBM initiative. By measuring the vibration, temperature and flow rate on different machines and adjusting repairs accordingly, the company has saved hundreds of thousands of dollars a year and avoided critical stoppages. In March and April 2001, for example, it avoided a shutdown that would have cost about US$15 million. "We are able to squeeze out higher profits in a business with extremely thin margins," he says. Despite advances in EAM technology, putting all the pieces together and developing a holistic approach remains a formidable challenge. Part of the problem is the sheer complexity of tying together so many machines, devices and systems. At present, no single vendor has devised software that can track and analyze everything, everywhere -- such as trucks in the field or cellular phones in people's hands and machinery on the plant floor. Asset management also can require the integration of a diverse set of technologies. Some companies use bar coding systems; others rely on radio frequency identification tags (RFIDs) or GPS devices to track moveable assets. Many firms monitor conditions via Ethernet connections; others use wireless connections, including 802.11. LeRoy says that a key is building the right IT and e-business structure so that it's possible to share data among facilities and applications. "That's when it's possible to integrate various activities and processes and achieve significant gains and ROI," he says. Building an enterprise-wide information architecture is the goal at Metaldyne Corp., a Plymouth, Mich., manufacturer of metal-based components, assemblies and modules for chassis, engine, driveline and transmission applications. The firm, with $2.1 billion in 2001 sales, has struggled with what Steve Zimmerman, director of supply chain systems, describes as a "mish-mash of applications based on what each plant thought it needed." Metaldyne, formed two years ago through the consolidation of three separate companies, MascoTech, Simpson Industries and Global Metal Technologies, recognized that it had to rev up its asset-management capabilities in today's tough market. In the past, plants frequently ordered expensive parts that the company already had in stock at another facility, and blanket maintenance techniques -- such as adding oil to equipment on specified days -- wasn't addressing variations in machines based on age, usage and other factors. An early DOS-based asset management program had outlived its usefulness, and so, last June, Metaldyne opted to install an EAM module as part of a JD Edwards OneWorld integrated suite. Since then, it has tied together a spare parts inventory for 12 plants, amassed detailed data about the labor required to maintain and repair equipment, and set up a system for monitoring more than 1,200 enterprise assets. When it's done right, enterprise-asset management can pay huge dividends. According to LeRoy, four out of five respondents who use an enterprise asset-management solution claim benefits, while three in five report having their investments pay for themselves within two years. As more manufacturers install EAM solutions and realize solid gains, they're looking to tie these systems into direct e-procurement to reduce costs and streamline asset disposal. Some are also beginning to use EAM across company boundaries. All of which is altering the corporate landscape. "Asset management has shifted from a reactive repair tool to a proactive solution for managing a vast array of resources," LeRoy says. "By becoming more predictive and preventative, companies can optimize the use of assets throughout their lifecycle and realize gains that weren't possible only a few years ago."

Help With Asset Management Here is a sampling of vendors that provide asset-management solutions: AspenTech,; offers several solutions focusing on optimizing assets and maintenance. Computer Associates International,; offers UniCenter Asset Management and other solutions. Datastream,; provides EAM software, including its flagship product, Datastream 7i. Indus,; provider of EAM solutions. Invensys,; offers EAM and other solutions. JD Edwards,; provides EAM under its OneWorld offering. Meridium,; offers enterprise reliability management systems. MRO Software,; provides asset-management solutions. Rockwell Automation,; offers solutions for optimizing assets and manufacturing operations. SAP,; offers applications focusing on asset optimization and produce lifecycle management. Synergen,; provider of EAM and computerized maintenance-management solutions. WhereNet,; offers wireless asset optimization and management solutions.

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